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microsoft cuts 4,800 jobs in xbox overhaul as ai spending mounts

Microsoft layoffs 2026

Microsoft announced Monday it will cut 4,800 jobs, roughly 2.1% of its global workforce, as part of a sweeping overhaul of its Xbox gaming division. The restructuring includes divesting up to five studios, a move aimed at improving returns after years of heavy spending on gaming.

The gaming division alone will lose 3,200 positions. Microsoft laid off 1,600 employees within that group on Monday, with more cuts to follow as the restructuring plays out.

Microsoft has poured tens of billions of dollars into Xbox over the past several years, including its blockbuster purchase of Activision Blizzard. Despite that investment, the company has struggled to close the gap with Sony’s PlayStation and Nintendo, a shortfall that pushed leadership toward a broader rethink of how the gaming business operates.

That rethink has already reshaped Microsoft’s strategy. The company has moved away from relying on console-exclusive titles to drive Xbox hardware sales, choosing instead to distribute its games across more platforms.

Four studios spun off, one under review

Xbox’s new head, Asha Sharma, laid out the studio changes in a note to employees. Compulsion Games, known for “South of Midnight,” and Double Fine Productions, maker of “Psychonauts,” will become independent studios. Ninja Theory and Undead Labs will be spun off to focus on growing their “Senua” and “State of Decay 3” franchises, respectively.

Arkane Studios, the developer behind “Dishonored” that is currently working on a game based on the Marvel Comics character Blade, faces a different path. Its management has started consultations with its workers union in France to review options for the studio’s future, Sharma said.

AI spending drives the push for efficiency

Big Tech companies are on pace to spend more than $700 billion on AI this year, and that spending is putting pressure on firms to demonstrate returns while managing the rising cost of deploying the technology across their operations. Amazon and Meta Platforms have both laid off thousands of employees in 2026 as they navigate similar pressures.

Microsoft’s Chief People Officer, Amy Coleman, addressed the connection between AI and the layoffs directly in a memo to staff. “The roles eliminated today are not being replaced by AI,” she wrote. “At the same time, what is true is that AI is changing how work gets done.”

Parth Talsania, CEO of Equisights Research, said the targeted nature of the cuts changes how investors are likely to read the announcement.

“That (targeted cuts) makes the announcement read more like portfolio reallocation and operating discipline than a fresh catalyst for the stock,” Talsania said. “In the near term, the market is likely to reward Microsoft less for headcount reductions and more for evidence that AI monetization is scaling faster than AI-related costs.”

Microsoft shares fell 1.4% on Monday. That decline follows a rough first half of 2026 for the stock, which dropped nearly 23% over the first six months of the year, its worst first-half performance since 2022.

A pattern of workforce reductions

This isn’t Microsoft’s first round of cuts this year. Earlier in 2026, the company offered voluntary buyouts to about 7% of its U.S. workforce, roughly 9,000 employees. Microsoft has a history of trimming its workforce near the end of its fiscal year in June, timing that lines up with its spending planning for the year ahead.

Gil Luria, managing director at D.A. Davidson, said the pattern reflects a deliberate financial strategy tied to AI investment.

“Microsoft has been managing down its workforce in order to pay for its AI investments,” Luria said. “By keeping its headcount down they have been able to accelerate revenue growth while maintaining the same margins.”

Azure growth comes with rising costs

Microsoft’s Azure cloud-computing business has benefited enormously from AI demand. Azure served as the exclusive seller of OpenAI’s models until April, a position that fueled significant growth for the division. But building the data centers needed to support that demand carries a steep price, and those costs are now squeezing Microsoft’s cash flow.

Microsoft is expected to report quarterly results later this month. In April, the company forecast Azure sales above Wall Street’s expectations, but it also projected $190 billion in spending for 2026, a figure that far exceeded what analysts had anticipated.

The company faces pressure from multiple directions beyond gaming and cloud costs. AI tools capable of automating routine business tasks are increasingly seen as a threat to Microsoft’s software business, one of its most reliable revenue sources. Meanwhile, a spike in memory chip prices, driven by data center demand, has forced Microsoft to raise Xbox console prices even as demand for the console remains soft.

The combination of factors, restructuring costs in gaming, ballooning AI infrastructure spending, and new pressure on its core software products, puts Microsoft in a position where investors are watching closely for signs that its AI bet is starting to pay off rather than simply adding to its expenses.

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Meta’s Muse AI Agent Promises Help, but Experts Warn of Online Chaos

By George Mensah 8 min read

Meta’s new AI agent, Muse, can cancel a gym membership, haggle with customer service, buy groceries and invite friends to a party. It asks for total control of your Gmail, your calendar and, on a Mac, your whole computer. A BBC reporter who tested the app for a week revoked its access and asked it to erase what it had collected, and the researchers interviewed say the problems reach well beyond one person’s inbox.

Muse is an AI agent, a tool that goes out into the world to complete tasks without supervision. It uses its own web browser, and Meta says phone calls are coming. It is the first free, full-featured agent from a big company. Millions of people downloaded it in its first weeks, and OpenAI has since announced an agent of its own. More are expected.

The experts interviewed for the BBC’s report expect the internet to get more frustrating as agents spread, with bots competing for tickets and appointments, small businesses swamped by automated requests and some agents working against their own users.

An agent that asks for everything

A cartoon avatar asks for your name. Then it asks for access to Gmail, the calendar and, on a Mac, the entire machine. Muse arguably asks for more trust and sensitive information than any product Meta has made.

Patrick Wardle, co-founder of Objective-See, a US nonprofit security foundation, uncovered serious flaws in the app. His advice is blunt. “I wouldn’t use it,” he said. “Personally, I would tell you to uninstall it altogether.”

The reporter tested it anyway, named the agent “Bob” and handed over access to their accounts.

Meta defends the product. “Muse is the first personal AI agent built for everyone and designed to be safe, secure and private – with built-in protections and user controls that put people in charge of how they use it,” a Meta spokesperson said. “Safety and security is a huge priority for us,” the spokesperson added, and said Muse went through extensive testing.

The ticket problem scales up

Experts expect the problems to look like the ones scalpers already cause. In 2024, some American fans of Taylor Swift flew to Europe to see her because resellers had pushed US ticket prices so high that a flight to an international concert cost less. Scalpers buy tickets to resell at a mark-up.

An agent gives anyone the same tool. Calli Schroeder, director of the AI and Human Rights Program at the Electronic Privacy Information Center (Epic), expects a sharp rise in bot activity. “There’s going to be a huge escalation of the problems we’re already having with bots,” she said.

The effects reach ordinary errands. Reservations at a hot new restaurant could become close to impossible to get. Appointments for passport or driver’s licence renewals in peak travel season could vanish too. Some people will probably hoard slots, booking five appointments just in case, since an agent makes that effortless.

Solutions exist. Society could drop “first come first served” and move to lotteries for scarce slots. That would change how much of daily life works. Schroeder sees little preparation. “I haven’t seen a lot of plans to address these things,” she said. “We’re just launching these tools and saying, ‘well, we’ll deal with the problems when they come up’.”

Meta says Muse asks permission before buying anything. According to the company, it is built to behave like a “reasonable, honest person”, one who would not buy every ticket to an event or refresh a page 500 times an hour.

Websites under strain

The reporter found Muse useful. Over a week, it messaged a seller on Facebook Marketplace with questions, ordered the reporter’s preferred dental floss and negotiated a $31 (£23) discount on a software subscription.

Now picture millions of agents doing this at once, on tasks that might take a person weeks. Schroeder asked what that does to the sites on the receiving end. “What happens if bots send 600 inquiries to a website a day, when normal humans might only send two?” she said. By our arithmetic, that is 300 times the normal load from a single visitor. “Businesses and individuals are going to have a lot to deal with.”

Web businesses already face pressure. Google and chatbots now answer many questions directly, so people visit fewer websites. Robots do not click ads or buy subscriptions, and the income those visits once produced is shrinking. Agents are expected to deepen the problem.

One analysis found that web traffic from bots rose 124% in the year to June 2026. Some websites and services are struggling because they were not built for that load.

Meta’s spokesperson said Muse completes tasks while respecting the interests of websites.

Whose side is the agent on?

Personal risks sit alongside the public ones. “If you’re empowering an agent to make things like purchasing decisions, or choices about taste and preferences, you’re opening yourself up to being exploited,” Schroeder said.

She gave examples. If Muse plans a holiday, a user has no way to check whether it found the best deal or picked flights and hotels that benefit Meta’s business partners. If it recommends music, the user cannot tell whether the picks come from their taste or from artists who signed deals with Meta.

Meta says Muse’s protections and user controls put people “absolutely in charge”, and that Muse “behaves like a personal assistant acting for a single person” and follows ethical guidelines meant to protect users. Schroeder has read the terms of service. She said they contain no guarantee that the app will act in the user’s favour.

Proposals for new rules

Ramesh Raskar, an associate professor at the Massachusetts Institute of Technology who studies AI agents, uses a driving comparison for the current situation. “Imagine there are no rules of the road. And you release billions of cars – the AI agents – and you just let them drive through playgrounds, hitting kids. That’s where we are,” he said.

Raskar is among the researchers designing an internet that works for agents, businesses and people alike. He argues that regulators need an approach built for agents. “Think about the models like an engine. The agents are the cars, and that’s what we need to regulate,” he said. “We need to establish the rules of the road: windshields, brakes, traffic lights and so on.”

The AI industry is developing protocols and standards that let bots connect directly to other services in a cooperative way. Some companies are building systems that would charge AIs a fee to scrape websites. Regulation could require agents to serve their users’ best interests.

There are early examples. A few restaurant reservation platforms have banned people for AI misuse. The UK has rewritten the rules for booking driving tests, in part to combat bots.

Raskar remains optimistic. “Agents could unlock so much investment, innovation and value,” he said, as long as the new rules do not hand any company an unfair advantage. In the meantime, people who use agents pay with personal data.

What Muse holds, and what Meta promises

The reporter has used the same Gmail address for 21 years. It is the login for hundreds of accounts. It holds medical test results, contracts, legal documents, family conversations, receipts and financial information. It also holds love letters from an ex-girlfriend, who gave permission before the account was connected. Muse also suggested connecting bank accounts. The reporter declined and did not let the agent loose on the hard drive.

Meta makes explicit privacy promises. The company says it will not connect any data Muse collects to its advertising systems. Special systems are meant to keep the AI from seeing passwords or payment methods. When a user connects Gmail, the agent asks whether it should scan the whole inbox or read only messages related to specific tasks.

There is a catch, according to Schroeder. By default, Meta uses Muse data to train new AI models. She said data built into a model cannot be removed, and that AIs can sometimes be tricked into revealing training data. Meta says it “sanitises” data to strip out personally identifiable information before training, and that users can opt out with a setting.

Wardle does not take those assurances at face value. Soon after launch he found a critical vulnerability. “This was literally 20 minutes of me poking at the app, and it just, like, fell over,” he said. With a simple hack, he said, an attacker could have taken over Muse and all of its data, and even controlled other connected devices such as a phone or a smart lock.

Meta fixed the flaw immediately. Wardle says the oversight still leaves him unable to trust the company’s privacy and safety claims. “These bugs were trivial to discover,” he said. “If they were willing to ship something that’s security was not well vetted, it doesn’t give me a warm fuzzy about their intentions.”

A Meta spokesperson disputes that view and said Muse was delayed for months for further privacy and security testing.

The tester’s decision

The reporter spent a lot of time with Bob and found the agent useful and enjoyable. After finishing the article, the reporter revoked Muse’s Gmail access and asked the app to erase everything it had collected.

The reporter’s reason was simple: “In the end, the fear won out.”

Sources: BBC News reporting on Meta’s Muse AI agent; comments from Patrick Wardle (Objective-See), Calli Schroeder (Electronic Privacy Information Center), Ramesh Raskar (MIT); statements from a Meta spokesperson.

Tech

Trump Renames AI “Super Intelligence” in Executive Order as Calls for Regulation Grow

By George Mensah 4 min read

President Donald Trump signed an executive order on Tuesday, Sept. 29, 2026, that renames artificial intelligence “super intelligence” across the federal government. The White House says the new term better describes what the technology can do. The order lands as critics press Washington for stricter limits on how fast AI develops.

What the order says

The executive order argues that current systems do “much more than imitate or automate discrete aspects of human intelligence.” It goes further in its central passage. “As these capabilities continue to improve, they increasingly represent not merely artificial intelligence, but a new era of Super Intelligence,” the text reads.

It adds that federal terminology “should reflect the transformative capabilities of these technologies and the limitless opportunities they create for the American people.”

Trump spoke to reporters after signing. “It’s not artificial, we all agree on that,” he said.

What agencies must do now

Every federal agency has to use the new term, or its short form “SI,” when it talks about the technology in public. That covers public communications, websites, reports and policy documents. If your local agency publishes an AI guidance page, expect it to change.

The order also gives Michael Kratsios, director of the Office of Science and Technology Policy, a defining role. He will decide whether the official definition of “super intelligence” should be modified or expanded. The order does not set a deadline for that decision.

A term that already means something else

The rename creates a vocabulary problem. In the AI field, super intelligence already refers to a specific kind of system, one that exceeds human cognitive ability in virtually every area of thinking. Nobody has built one. Researchers treat it as a future possibility, and much of the safety debate centers on it.

Under the order, federal documents will apply that label to chatbots, coding assistants and image generators that exist today. A reader who sees “SI” in a government report may assume the government is describing something far more advanced than what companies actually sell. Kratsios’s authority to modify the definition could narrow that gap, or it could widen it.

Timing and the push against regulation

The order follows a week of similar messaging. Trump began using the term at the U.N. General Assembly last week, where he pushed back on calls for tighter rules on the industry. He told world leaders that tech executives would build the right guardrails into their own models.

Concerns have grown since then. Worries about AI replacing workers keep rising. Recent reporting has also described rogue agents linked to a security breach involving Australia’s prime minister, and AI agents that accessed U.S. government websites. Some systems have also been used to start cyberattacks.

Trump has repeatedly called whistleblower warnings about weak oversight overblown and a “hoax.” He has said he will not slow AI growth. In his view, keeping American dominance in the technology is a national security matter.

The industry’s own safeguard

On the same day, tech executives signed a “morally binding” constitution on AI at the White House. Its terms ask companies to hire an independent external auditor. The auditor would check that models are “operating as intended.”

The document also asks companies to set up internal controls meant to stop models from hacking systems. A team would monitor those controls. That team would answer to an independent committee of the company’s board.

The wording matters here. “Morally binding” describes an obligation companies accept by choice. The reporting on the document does not describe fines, penalties or a government body that could enforce it. Whether outside auditors get real access to model internals, and what happens if one finds a problem, are open questions.

What the two actions have in common

The order and the constitution came out the same day, and they share a theme. Both keep the government’s role limited. The order changes what officials call the technology. The constitution leaves safety checks largely in company hands.

Supporters of that approach say it keeps American firms moving fast against foreign competitors. They argue that rigid rules written now could be out of date within a year. Critics say voluntary pledges have a weak record in other industries, and that a stronger name for the technology may make the public less cautious about it.

Neither side has settled the argument. What is clear is the direction of policy. The administration is choosing branding and industry commitments over new binding rules, at a moment when the documented incidents involving AI agents are piling up.

What happens next

Three things are worth watching over the coming weeks.

  • Kratsios’s definition. Any change to the official meaning of “super intelligence” will show how the administration wants the term understood.
  • Agency compliance. Federal sites and reports should begin switching to “SI” now that the order requires it.
  • The auditor provision. The industry constitution only matters if independent auditors are named, given access and allowed to publish what they find.

Congress has not yet responded to the order, and no agency has published a compliance timeline. Until Kratsios acts on the definition, “super intelligence” will mean one thing to researchers and something looser in federal paperwork.

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