Report: Xbox considering sale or closure of Arkane, other studios, as layoffs loom

Microsoft is reportedly considering shutting down at least five studios as part of a major restructuring of its Xbox division, with closures or spinoffs potentially announced as early as July 6, 2026. The restructuring would be accompanied by mass layoffs affecting over 1,000 employees across Xbox studios.

Arkane Studios, the acclaimed developer behind the Dishonored series, Deathloop, and Prey (2017), is among the studios at risk. The closure would reportedly result in the cancellation of Marvel’s Blade, an in-development game announced in December 2023. According to The Verge’s sources, Blade was originally slated for late 2026 but has been delayed to late 2027 and is running significantly over budget—marking it a priority target for cost-cutting measures.

Other studios reportedly facing closure or spinoff include Double Fine, Compulsion Games, Ninja Theory, and Undead Labs. While closure is one possibility, Microsoft is also exploring selling or spinning off these studios to external buyers, though no potential acquirers have been publicly named.

The restructuring is being driven by new Xbox CEO Asha Sharma and represents a major “reset” of Microsoft’s gaming strategy. While Arkane Studios’ closure isn’t certain—it could potentially be sold rather than shuttered—the cancellation of Blade appears to be a strong likelihood under Microsoft’s cost-reduction plans.

Report: Xbox considering sale or closure of Arkane, other studios, as layoffs loom

Sources