Microsoft has announced a significant restructure that will cut 4,800 jobs—roughly 2.1% of its workforce—with Xbox taking a substantial hit. Amy Coleman, executive vice president at Microsoft, stated in a memo that the tech giant needed to pivot towards areas that can deliver for customers amid a fast-changing industry.

The reorganisation will see more than 1,600 roles immediately axed from Xbox, with four game development studios—Compulsion Games, Double Fine Productions, Ninja Theory and Undead Lab—being spun off. Asha Sharma, who recently took over as CEO of Xbox, said the changes were significant and aimed at a bigger future for the company.

Sharma also noted that Minecraft developer Mojang and Candy Crush developer King will now report directly to her, marking a shift in how content is managed within the organisation. Both studios are set to depart with their intellectual property (IP), as they return to independent management.

The move comes amid already tough times for the gaming industry, with many studios facing layoffs. Microsoft’s decision not to replace lost roles with AI underscores the complex nature of technological change in the sector.