Microsoft's Xbox video game division announced 3,200 layoffs and the closure of four game studios in a process described by CEO Asha Sharma as "the largest restructuring in Xbox history." These changes were communicated to employees in a note titled "Resetting Xbox" and will be implemented over the next year.

Sharma stated that approximately 1,600 of the layoffs would occur today, with the remainder spread over the next 12 months. "I acknowledge that a year-long restructuring process will create additional challenges," Sharma said, emphasizing that the necessary changes cannot be made in a single day. It was reported that a total of 4,800 layoffs are planned across Microsoft, and Xbox is also affected by this process.

The changes include transferring the management of Compulsion Games and Double Fine Productions to independent studios. Ninja Theory and Undead Labs will operate under new ownership. Sharma remarked, "Our current business is not healthy," indicating that they are facing lower margins and growth rates than expected.

Sharma noted that decision-making processes have become complex, making it harder for them to serve players. "As we reset Xbox, we will reduce management layers to 5, and ideally to 3," she said. Additionally, she appointed Helen Chiang as the region's first COO and announced that she would take on P&L responsibilities.

Sharma stated that these changes are made for a greater future for Xbox, predicting that the next decade will see a gaming world that is larger, more global, and more creative. Microsoft's HR director Amy Coleman clarified that the layoffs are not about replacing employees with AI, but that technology is among the reasons for the changes.