Microsoft is cutting 4,800 jobs and reducing staffing at its Xbox division by about 20 percent. It will also split off 4 game studios, CNBC reported on Sunday.

The layoffs amount to about 2.1 percent of the company’s workforce. Microsoft said the restructuring is aimed at cutting costs during the transition to AI.

The Xbox division will see the biggest reduction. Asha Sharma (아샤 샤르마), CEO of the Xbox unit, told employees the division plans to cut 3,200 positions by fiscal 2027. Of those, 1,600 were cut on Sunday. The remaining 1,600 will leave the company in stages in addition to the companywide 4,800 job cuts. Sharma said the year-long restructuring could add to the burden, but needed change cannot be completed in a single day. She said it would return to growth in 2027.

Microsoft is also reorganising its gaming operations. Amy Coleman (에이미 콜먼), Microsoft’s chief people officer, said the company will separate 4 game studios. Compulsion Games and Double Fine Productions will become independent companies again. Ninja Theory and Undead Labs have entered talks on terms for being folded into new owners.

Microsoft cited technological change and differences in growth by business as drivers for the restructuring. In recent quarters, cloud services and LinkedIn have grown faster, while Windows licensing, Surface and Xbox have been weak. Xbox revenue has continued to fall.

The company said AI is not directly replacing the laid-off workers, but AI is changing how work is done. It said some routine tasks can be automated and employees need to learn and adapt.