Microsoft also announced a $2.5 billion business unit that embeds 6,000 AI engineers inside client companies #
Microsoft is planning to downsize its global workforce by 4,800 jobs or 2.1%, which is primarily related to a major restructuring of the company's Xbox gaming division, including the shuttering of up to five studios as part of efforts to improve returns.
The Xbox overhaul is likely to impact 3,200 jobs, including 1,600 employees who were laid off on day one. Note that Microsoft has invested billions of dollars in Xbox over the years, including its takeover of Activision Blizzard, but still lags behind Sony's PlayStations and Nintendo. The latest walkout breaks the record for a gaming layoff in 2024 where 1,900 Microsoft employees were affected.
The sweeping layoffs didn't even spare veteran game developers who have been with the company for decades. Kevin LaChapelle joined Microsoft as a software design engineer in August 1989 after completing his Bachelor of Science in computer science from Carnegie Mellon University.
LaChapelle built the Xbox Backward Compatibility programme, which let Xbox One run games meant for the Xbox 360. He climbed ranks at Microsoft every four to six years, from development manager across home publishing and digital video & media to software engineering manager at Xbox before becoming the vice president of the Xbox platform.
The latest layoffs at Microsoft ended LaChapelle's tenure of 37 years at the company.
'I have worked in many different parts of the company, and I will say my fondest memories are of leading the team of very talented engineers who built the Xbox Backward Compatibility program. Sitting in the auditorium when Phil announced the program at E3 2015 was incredible. The audience's reaction was unbelievable. I followed that with leading the team who created our Cloud Gaming product,' LaChapelle wrote in a LinkedIn post.
New Xbox CEO With No Gaming Experience #
Microsoft chief Satya Nadella appointed former Instacart COO and Meta Platforms VP Asha Sharma as CEO of Microsoft Gaming this year. Sharma took the helm in February when Phil Spencer retired. Market commentary and social media users have been pointing to Sharma's lack of gaming industry experience. At the same time, she apparently wants to entirely reset the Xbox business.
Despite concerns around her appointment as Xbox chief, investors are banking on chief content officer Matt Booty, under whom Microsoft Gaming grew to around 40 studios across Xbox, Bethesda, and King.
Last year, Microsoft trimmed its workforce by 15,000 jobs in two tranches. In April, it launched the 'rule of 70' for the first time, offering 9,000 older US workers packages to leave, and a third did.
Note that Microsoft spent over $100 billion on AI infrastructure in the latest fiscal year. Days before the latest layoffs, Microsoft had also announced a $2.5 billion business division that embeds 6,000 AI engineers inside client companies. In all, Microsoft let go of 4,800 employees the same week it funded 6,000 AI engineers, further driving concerns around AI layoffs worldwide.
However, Microsoft's chief people officer Amy Coleman noted in a memo to staff that the layoffs were meant to help in focusing Microsoft's 'people, investments, and energy on the priorities that will keep Microsoft positioned to deliver for customers in a fast-changing industry.'
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