Xbox profitability crisis

What happened: Microsoft (MSFT) announced a significant restructuring, cutting 4,800 jobs, or 2.1% of its global workforce, effective Monday, July 6. The majority of these layoffs, 3,200, are from the Xbox division, with 1,600 employees let go on the first day. Xbox CEO Asha Sharma acknowledged the division's struggles, stating, "Our business today is not healthy. We must reset Xbox."

Market impact: The gaming sector is affected, with Microsoft's Xbox profitability crisis driving the layoffs. The company is restructuring its Xbox business and divesting up to five studios, aiming to boost returns after years of heavy investment. Microsoft's stock price fell on the news, reflecting investor concerns about the company's gaming division.

What to watch next: On August 23, Microsoft will report its fiscal Q1 2024 earnings, providing an update on the impact of the Xbox restructuring. Additionally, investors will be watching for any further announcements regarding the divestment of Xbox studios and the future strategy for the gaming division.