In a blog on the company’s website on Monday, Amy Coleman, executive vice president and chief people officer at Microsoft, said the changes will mostly affect its commercial and Xbox organisations.
"In our Microsoft commercial business, they build on last week’s Frontier Company announcement, reshaping how we work and embedding our engineering experts alongside customers so we can help them accelerate their technology deployments," she said.
"In Xbox, we are restructuring to position the business for long-term success. Engineering teams across the company will also evolve their structure and priorities to meet customer needs and innovate for the future."
Coleman said the company will transition four of its gaming studios to operate under new management, with the goal of preserving both their intellectual property and ongoing projects.
She insisted the roles being eliminated are not being replaced by AI. "At the same time, what is true is that AI is changing how work gets done," she said. "Some of the tasks we do every day can now be automated, and that means we all need to keep learning, keep building new skills, and keep adapting as the work evolves."
In an email sent to staff, Xbox CEO Asha Sharma said the team would be reduced by around 3,200 throughout FY27. This includes the elimination of about 1,600 roles with immediate effect, while four studios will leave Xbox to new management.
"I recognise that a year-long restructuring creates additional challenges," said Sharma. "Unfortunately, it is not possible to make all the necessary changes in a single day, and I wanted to be direct about the scale.
"These changes are about a bigger future for Xbox, not a smaller one. The next decade of gaming will be larger, more global, and more creative than anything we’ve seen before. This year, we’ll invest as much in Xbox as we ever have, but we’ll invest with greater focus, greater discipline, and greater clarity, all in service of making Xbox where the world plays and creates."