Key Highlights:
- Microsoft is reportedly going for a fresh round of layoffs starting this January 2026.
- One of the many affected divisions happens to be Xbox this time around.
- Microsoft has now clarified that the rumor is entirely false, via Lead Communications’ Frank X. Shaw.
As if 2025 didn’t end in enough of a bad note, 2026 seems to be shaping up to be way worse as a recent report alleges that Microsoft might be settling for another round of layoffs, as AI takes precedence over everything in sight.
These layoffs are also expected to affect the Xbox gaming division as well, which is especially disheartening when you take into the consideration the already deplorable state of affairs. It’s going to get worse before it eventually gets better, and Microsoft has no one but its own greed to blame here.
Update: This rumor has now been debunked. Frank Shaw, the Chief Communications Officer at Microsoft has reiterated this is entirely false in an X post.
Microsoft’s Lead Communications Officially Responds to The Rumor
100 percent made up / speculative / wrong.
— Frank X. Shaw (@fxshaw) January 7, 2026
Microsoft’s Lead Communications lead, Frank X. Shaw has officially debunked rumors of Microsoft culling its Xbox division. Responding to yet another viral post with the mention that the entire content is outright false, Shaw reiterated his stance on the rumor, claiming it was unfounded.
He was also supported in his claim by industry insider Jez Corden, who mentioned these layoffs were wholly untrue, at least for the Xbox side of things.
Given how it is practically illegal for a spokesperson of the company to lie about such points of discussion, the rumor can be safely put to rest.
Xbox Employees to Receive Yet Another Wave of Layoffs, It’s Claimed
As per a recent report on Tipranks, Microsoft Corporation is reportedly looking into yet another round of layoffs starting from the third week of January. This number includes about 5 to 10 percent of its existing workforce (around 220,000 employees) which isn’t exactly an insignificant number.
These reports also indicate three principal areas of focus here – the Azure cloud teams, global key sales team and of course, the Xbox gaming section.
This is also expected to be followed by a much stricter office policy starting February 23, 2026 wherein remote work will be culled down for those within 50 miles of a nearby office.
This wouldn’t be the first in a series of layoffs affecting Xbox, and it most certainly wouldn’t be the last one either, despite Microsoft and Xbox remaining ‘committed’ to the future of gaming, which seems more of a joke at this point.
That being said, this information hasn’t been validated by Microsoft, so it would be wise to take this with a grain of salt.
This Is Despite Microsoft Gaining Massive Profits in Recent Quarters
As more money is pumped into AI datacenters, tools and technologies, they start to far eclipse the needs of traditional, ‘less important’ fields. Microsoft is also following the same, opting to willfully grow its AI division at the expense of its already established wings.
We’ve already seen some form of unnecessary AI integration in Xbox, and it is feared that it could only worsen from here on out.
Also Read: Beyond Good & Evil 2 Reportedly in ‘Active Development’
That being said, the layoffs do strike as being somewhat strange – after all, how is a billion dollar company like Microsoft (who has had a very, very successful Q1 2026 fiscal year) not afford to keep these divisions thriving?
Either AI is not working out to be the magic, do it all solution that tech bros are envisioning it to be, or some folks are not being held accountable at their positions. Or it could be both factors in play, which regardless of how you slice it, does make for a poor showing indeed.
