Microsoft announces 3200 layoffs and four studio departures in “most significant” Xbox restructuring in history

Microsoft announced the largest restructuring in Xbox history, cutting 3,200 jobs from its gaming division with 1,600 immediate layoffs and 1,600 more expected over the fiscal year. This represents approximately 20% of Xbox’s workforce and is part of a broader Microsoft reduction of 4,800 employees (2.1% of total workforce).

Four studios are being divested from Xbox Game Studios: Double Fine and Compulsion Games will return to independence with full ownership of their IP and catalogs, while Ninja Theory and Undead Labs are being sold to new ownership with funding to complete current projects. Arkane Lyon is undergoing consultation regarding its future. Importantly, no studios are being closed entirely.

Xbox CEO Asha Sharma attributed the restructuring to spreading resources too thin across multiple strategic bets, including Game Pass expansion, multiplatform initiatives, and studio acquisitions that failed to deliver expected returns. She stated the Xbox business “is not healthy” and noted the division loses 64 cents for every dollar invested.

The company is refocusing investment on established franchises and higher-performing studios, with Activision, Bethesda, Blizzard, Mojang, and King receiving increased funding priority. Notably, no previously announced games are being cancelled as a result of the cuts.

The restructuring reflects broader challenges facing Xbox, including Game Pass subscription declines (reportedly at 30 million subscribers), hardware price increases, and competitive pressures. Hardware development is reportedly seeing minimal cuts as Microsoft focuses on innovation to reduce manufacturing costs for its upcoming Project Helix console. These moves follow significant leadership changes in February when Phil Spencer departed and Asha Sharma became CEO.

Microsoft announces 3200 layoffs and four studio departures in “most significant” Xbox restructuring in history

Sources