Microsoft is laying off 4,800 employees in its Xbox unit, a 2.1% reduction in its overall workforce, and spinning off four studios into independent entities. The restructuring targets the company's worst-performing segment after Xbox revenue fell 5% annually in the third quarter of fiscal 2026, dragging down the More Personal Computing division's revenue by 1% even as total company revenue rose 18%. Despite the move, analysts note that Microsoft's stock faces deeper challenges from AI competition, with Copilot subscriptions lagging behind ChatGPT and heavy reliance on OpenAI, which accounts for about 45% of Microsoft's $627 billion backlog.
Microsoft CorporationRestructuring with layoffs and studio spin-offs due to Xbox revenue decline, but also faces deeper AI competition challenges.
Microsoft's Copilot lagging behind ChatGPT highlights OpenAI's competitive advantage.