REDMOND — Microsoft announced a reduction of 4,800 employees, representing 2% of its global workforce, on July 6, 2026. Approximately two-thirds of the layoffs, totaling 1,600 employees, came from the Xbox gaming and entertainment division.

Hundreds of union video game workers represented by the Communications Workers of America were included in the Xbox layoffs. Xbox CEO Asha Sharma stated in an internal memo that the console maker was "losing 64 cents for every dollar invested."

Xbox sales decreased by 5% year-over-year in the latest quarter. The division reported a 3% profit margin during that time, while Microsoft generally expects about a 30% profit margin from its major divisions. Xbox Game Pass reached 34 million subscribers in February 2024. The price of Xbox Game Pass Ultimate increased by 50% in October 2025, raising the monthly cost from approximately $19.99 to $29.99. Sharma later announced a price reduction for the service from $30 to $23 per month. Microsoft also discontinued Copilot on Xbox consoles.

Microsoft has reduced its workforce by approximately 35,000 employees over the past three and a half years. During this period, the company's operating margins increased to 46.3% from 42.3%, and Microsoft stock increased by 72%. However, Microsoft stock decreased by 19% year-to-date as of July 7, 2026, and fell approximately 37% from its 52-week high to a low of $349.20 on June 24, 2026.

Microsoft reported revenue of $82.9 billion for the third quarter of 2026, an 18% increase from the year-earlier period. The company's cloud business revenue grew by 29% year-over-year to $54.5 billion in the third quarter of 2026. Microsoft's earnings per share for the third quarter of 2026 were $4.27, representing a 23% increase and exceeding the consensus estimate of $4.06. The company achieved its tenth consecutive earnings beat in the third quarter of 2026. Microsoft's net income increased by 23% to $31.8 billion in the third quarter of 2026.

CWA President Claude Cummings Jr. addressed the layoffs. "When Microsoft sought to grow its video game division, corporate executives made an agreement with video game workers and their union, CWA, to respect their right to organize for a new day for workers across Microsoft's video game studios," Cummings said. He added, "Although our union signed neutrality agreements with Microsoft, we have been extremely disappointed by a company that has slow-walked our members at the bargaining table, making CWA members wait for the protections of a union contract." More than 3,500 Xbox workers have formed unions with the CWA since 2022, following Microsoft's agreement to a neutrality framework with the CWA in 2022.