Microsoft to Cut 4,800 Jobs, Accounting for 2.1% of Total Staff. Xbox Division Suffers Purge, Stock Drops Over 18% This Year to Rank Dead Last Among Tech Giants.

TradingKey - Microsoft's ( MSFT) new round of workforce optimization has officially taken effect, with 4,800 employees laid off across the company on the same day, representing 2.1% of the total workforce, and the gaming business becoming the core area of contraction. The Xbox division will see a cumulative layoff rate of 20% by fiscal year 2027, to be implemented gradually in batches, making it the hardest-hit area of this adjustment.

In addition to the layoffs, Microsoft has simultaneously initiated a review of its gaming assets, with four studios spinning off from the system: Compulsion Games and Double Fine, acquired in earlier years, will return to independent operations, Ninja Theory and Undead Labs will change hands, and France's Arkane Studios is also moving forward with an evaluation of strategic options.

This is the first large-scale divestment of studios by Microsoft since its massive acquisition of gaming assets, essentially representing a contraction of non-core territories to focus on its main business.

Behind this large-scale adjustment is the double pressure of performance and stock price faced by Microsoft. In terms of stock price, Microsoft accumulated a decline of 18.48% within 27 weeks this year, lagging behind its mega-cap tech peers. The market is primarily concerned that AI agents will disrupt traditional enterprise software, and Microsoft's own AI products have not yet achieved mainstream breakthrough success.

[Source: TradingView]

On the other hand, there is a clear divergence at the business level, with cloud services and LinkedIn maintaining growth, while revenues from traditional businesses such as Windows licensing, hardware, and Xbox gaming continue to shrink, making them key targets for cost optimization.

To smoothly advance workforce optimization, Microsoft had previously launched its first-ever voluntary retirement program, with over a third of eligible employees accepting the package; the company will continue to explore similar flexible optimization measures in the future. Officials emphasized that this layoff is not a direct replacement of positions by AI, but acknowledged that AI is reshaping work methods and that enterprises need to transform simultaneously to adapt to customer needs.

Overall, this is Microsoft's proactive strategic contraction during the transition period of the AI industry. By divesting non-core businesses and optimizing its personnel structure to control costs, it is attempting to stabilize its core business during the painful period of AI transition, leaving room for subsequent business adjustments.