Microsoft has cut approximately 4,800 jobs, with the Xbox unit downsizing and preparing to spin off four gaming studios, CNBC reports.

The layoffs form part of a broader wave of job reductions across the company, hitting divisions including gaming. For teams inside Xbox, the immediate consequence is a smaller headcount across engineering, publishing and support functions, with managers now reassessing project staffing in the wake of the cuts.

The structural change is just as significant as the headcount figure. Microsoft intends to spin off four gaming studios, moving them out of the Xbox organization entirely. For the studios themselves, that means a shift from first-party backing under Microsoft's ownership structure toward independent operation — a transition that raises questions about funding, publishing agreements and ongoing access to Microsoft's platform and distribution infrastructure.

Neither the identities of the four studios nor the timeline for the spin-offs were disclosed in the report. Microsoft has not yet detailed which projects will remain under Xbox Game Studios and which will follow the departing studios.

The cuts come against the backdrop of Microsoft's expanded gaming portfolio following its $68.7 billion acquisition of Activision Blizzard, which closed in October 2023. Since then, the Xbox organization has absorbed multiple studios and franchises, and the current restructuring signals that Microsoft is actively rationalizing that enlarged footprint rather than continuing to grow it.

For developers and publishing partners, the practical implications are concrete. Projects tied to the four departing studios will need new publishing, funding or co-development arrangements once the spin-offs complete. Teams inside Xbox face reduced staffing, which typically translates into reprioritized roadmaps and slower iteration on live-service and in-development titles.

The industry context matters here. Xbox's restructuring follows years of sector-wide contraction, during which Microsoft itself has conducted multiple rounds of gaming layoffs — including cuts that affected Bethesda and Activision Blizzard staff after the acquisition closed. This latest round extends that pattern and adds a new instrument to it: divestiture via studio spin-offs, rather than closure.

Microsoft has not publicly specified severance terms for the 4,800 affected employees, nor has it broken down how the cuts distribute across Xbox versus its other divisions. Investors and studio leadership will be watching the next earnings report for that divisional detail, plus formal confirmation of which four studios will leave the Xbox umbrella and on what terms.