Xbox Denies Plan to Replace U.S. Layoffs With Overseas Outsourced Labor

Xbox says it has no intention of swapping out U.S.-based workers who were laid off in its newest round of cuts with lower-cost outsourced labor from overseas, pushing back on claims that spread widely online after Microsoft announced the restructuring.

On July 6, Xbox CEO Asha Sharma announced layoffs across Microsoft’s gaming organization. The company described the move as an urgent restructuring effort, and it began by removing roughly 1,600 roles immediately. Microsoft also projected that another 1,600 positions would be eliminated by June 30, 2027—at the close of its current fiscal year—making the combined total of 3,200 redundancies the biggest single wave of layoffs in the history of the video game industry. Soon after the announcement, social media posts alleged that many of the affected employees in the United States would be replaced with cheaper freelance staff operating from abroad.

Award-winning actor Ben Starr publicly criticized the Xbox layoffs, accusing Microsoft of telling “multiple lies” leading up to the record-breaking workforce reductions.

Microsoft Denies Plans To Replace Laid-Off Xbox Employees With Overseas Outsourcing

Microsoft’s communication leadership responded directly on July 10. In a post on X, Chief Communications Officer Frank X. Shaw said the job cuts were meant to restructure what Microsoft views as an unhealthy Xbox business—not to replace domestic employees with overseas workers. Shaw added that the H-1B-related numbers referenced in the allegations were company-wide, covering both visa renewals and applications for new hires, and that they represented only a small portion of Microsoft’s overall workforce.

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Alongside the outsourcing narrative, some users also escalated into racist remarks about Sharma. A small but vocal group on X highlighted her Indian heritage and tried to frame her as a foreign executive who would allegedly cut American jobs. Shaw pushed back, emphasizing that Sharma was born, raised, and educated in the United States, including pointing to her Wisconsin background.

How Many U.S. Jobs Is Xbox Really Cutting?

Shaw further argued that most roles affected by the Xbox restructuring are located outside the United States. He also described Xbox as both the industry’s biggest employer of American workers and the largest company based in the U.S. for its category—an attempt to undercut claims that domestic work was being shipped overseas. If positions are primarily abroad, Shaw said, they can’t be treated as evidence of U.S. roles being displaced.

Microsoft has not published enough granular, role-by-role information to independently match which eliminated positions correspond to the H-1B applications cited in the online allegations. No clear proof has surfaced that the two sets of jobs line up one-for-one. Even so, the exact number of the 3,200 redundancies that will hit Xbox workers inside the United States remains uncertain.

Earlier Microsoft Gaming Cuts Contextualize the Latest Restructuring

Microsoft has been shrinking its gaming workforce for years after finishing the Activision Blizzard acquisition in October 2023, which ended a multi-year period of studio purchasing. Earlier layoffs hit many of Activision Blizzard’s customer service teams, fueling broader worry about how the company reshapes operations after removing internal roles. The newest restructuring is described as far more significant, but Microsoft maintains it is meant to refine Xbox’s priorities and streamline how the business operates rather than pursue short-term cost reductions.

Sharma’s framing was blunt: the FY2027 layoffs, she said, are required because “our business today is not healthy.”