[One of Microsoft’s Offices Photo Credit: Pixabay]

Microsoft announced on July 6th that it will layoff about 4,800 employees, primarily from its Xbox division, which operates the company's popular video game console. 

Approximately 2.1% of Microsoft's global workforce would be affected by the layoffs, which the company partially blamed on artificial intelligence's disruption of the IT industry. 

As AI reshapes work processes, none of the terminated positions will be replaced. 

As technology advances, implemented, and utilized more rapidly than ever before in the company's history, Microsoft's business is evolving along with the entire industry. 

In total, Xbox will eliminate 1,600 positions as part of the layoffs, along with a further 1,600 positions through the end of fiscal year 2027. 

This marks the start of the biggest restructuring in Xbox's history due to ongoing financial difficulties within the division. 

Microsoft cited Xbox's Game Pass subscription program, which costs a monthly price for access to a selection of games, as having performed worse than anticipated. 

In its attempts to produce more new games, the company also had to contend with fierce industry competition. 

The business faces competition from smaller independent studios in addition to the biggest publishers.

As part of the new plans, Xbox will not cancel any of its first-party, publicly announced games or projects. 

However, the restructuring will result in four Xbox game development studios: Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Lab, being split off. 

Leadership emphasized that although the company is significantly shifting its resources toward AI-driven goals and automation tools, these terminated functions are part of an ongoing company-wide transition rather than being directly replaced by AI. 

The layoffs come at a time when the gaming industry is already struggling, with many companies still feeling from severe layoffs in the past several years.

In 2024, Xbox laid off over 2,000 employees and closed four studios that it had acquired before making a huge acquisition of Activision-Blizzard, the maker of Call of Duty.

After announcing plans to double down on its multibillion-dollar AI spending, Microsoft announced less than a year later that it will eliminate up to 9,000 jobs. 

This move comes amid rising concerns across the tech industry, with companies like Microsoft raising the price of outdated consoles and other consumer electronics due to the skyrocketing cost of technology, with many blaming AI data centers for driving up demand too quickly for supply to keep up. 

Microsoft entered the console game market with the Xbox brand, which debuted in November 2001. 

It quickly expanded from a single piece of hardware to a vast gaming ecosystem spanning four generations of consoles and was first built around PC-like architecture and Microsoft's DirectX graphics technology. 

First-person shooting games on consoles gained significant popularity with the release of "Halo: Combat Evolved" and in 2002, Microsoft introduced Xbox Live, which revolutionized online multiplayer on home consoles. 

Early hardware issues with the system, known as the Red Ring of Death, cost Microsoft more than $1 billion but forced significant redesigns and improvements to customer support. 

Today, Xbox has evolved far beyond just a physical console as high-fidelity games can be played on PCs, mobile devices, and smart TVs thanks to Xbox Cloud Gaming and the extension of Xbox Game Pass.