Microsoft CEO says Xbox is simply ‘streamlining’ after cutting over 5,750 jobs in three years
Microsoft CEO Satya Nadella has defended the company’s substantial workforce reductions at Xbox, characterizing the cuts as part of a natural “streamlining” process. The latest round, confirmed in July 2026, will eliminate 3,200 positions from Xbox Game Studios by the end of the fiscal year—part of a broader pattern that has seen over 5,750 Xbox employees laid off in just three years.
The reductions have resulted in the divestment or closure of several notable game studios. Compulsion Games, Double Fine Productions, and Undead Labs have been divested, while Arkane Studios and Ninja Theory face uncertain futures. These cuts follow Microsoft’s $68.7 billion acquisition of Activision Blizzard in October 2023, which was intended to significantly expand the company’s gaming portfolio.
Nadella addressed the cuts during an appearance on the Sources Podcast, where he described the “streamlining” efforts led by new Xbox chief Asha Sharma as “great to see.” Rather than framing the layoffs negatively, he emphasized the need for Xbox to develop a “sustainable business model” that allows the division to reach broader audiences with its games.
Despite the workforce reductions and studio closures, Nadella expressed optimism about Xbox’s future trajectory. He stated his belief that the division will “return to growth” in the 2027/28 fiscal year, suggesting that the current restructuring is intended as a foundation for future expansion rather than a permanent contraction.