Microsoft is cutting 4,800 jobs, or about 2.1% of its global workforce, including around 1,600 positions in its Xbox gaming division, as the company restructures the business to improve its performance.

The company announced Monday that the Xbox layoffs are part of a broader reorganization aimed at "resetting" the gaming business as it faces growing competition.

"Our business today is not healthy," Xbox CEO Asha Sharma said in a memo to employees. Sharma, who took charge of the gaming division earlier this year, said Xbox's profit margins are three to 10 times lower than those of comparable gaming platforms and publishing businesses.

She said the gaming industry is also facing a major hardware crisis as the cost of console components continues to rise. Xbox competes with Sony's PlayStation and Nintendo's Switch in the global console market.

Sharma said Microsoft plans to eliminate another 1,600 Xbox jobs during the current fiscal year, which began last week. The company will also spin off four video game development studios that it had previously acquired.

Microsoft completed its $69 billion acquisition of gaming company Activision Blizzard nearly three years ago. The deal brought popular franchises such as Call of Duty under Microsoft's ownership and was intended to strengthen its game development portfolio while expanding its Netflix-style game subscription service.

However, Sharma said those businesses had generated value but had not grown as quickly as the company had expected.

The Xbox job cuts come on top of Microsoft's wider workforce reduction announced Monday. Chief People Officer Amy Coleman said the broader layoffs reflect changing customer needs.

In a blog post, Coleman also clarified that the positions being eliminated are "not being replaced by AI."

The latest layoffs follow voluntary buyout offers Microsoft made to about 8,750 employees in May. According to Coleman, more than 30% of eligible workers accepted those retirement offers.