Xbox Cuts 3,200 Jobs and Splits Off Four Game Studios

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Xbox layoffs have begun. CEO Asha Sharma announced that 1,600 roles will be eliminated today, July 6, as part of a staff reduction plan that will see approximately 3,200 people cut throughout the 2027 fiscal year.

Sharma describes the plan as "the most significant restructure in Xbox history." After previous layoffs, these 3,200 cuts represent roughly 20% of Xbox altogether.

"I recognize that a year-long restructuring creates additional challenges," Sharma adds. "Unfortunately, it is not possible to make all the necessary changes in a single day, and I wanted to be direct about the scale."

These 1,600 people will exit the company alongside four studios: Compulsion Games and Double Fine will operate independently, while Ninja Theory and Undead Labs have "entered terms to join new ownership."

Additionally, Xbox is reviewing "potential strategic options" with Dishonored maker Arkane, which was rumored to be on the chopping block amid Marvel's Blade production obstacles.

South of Midnight, by Compulsion Games (Image credit: Compulsion Games) Sharma outlines dire conditions for Xbox: 64 cents of "every dollar we invested" was lost on average, the brand's operating margins – a metric downright revered at Microsoft – are "3-10x lower than comparable platform and publishing businesses," and major bets on studio acquisitions, Xbox Game Pass, and multiplatform releases have not seen expected returns.

So, Xbox is cutting thousands of people amid other moves to "reset" and right the brand. "Today’s decisions do not reflect their talent or dedication," Sharma adds.

Broader initiatives include streamlined leadership, with Helen Chiang, an Xbox veteran of nearly 20 years, appointed as chief operating officer as Dave McCarthy retires after 17 years at Xbox. Sharma also seeks to reduce the layers of management involved in approvals from as many as 14 in some areas to as few as five or three.

"In addition, Mojang and King will now report directly to me," Sharma explains. King, the mobile arm of the Activision Blizzard King deal, sits alongside Minecraft house Mojang as Xbox properties that "have increasingly become platforms and are our largest by monthly active players."

Sharma insists "these changes are about a bigger future for XBOX, not a smaller one," reiterating plans to invest "as much in Xbox as we ever have," but with "greater focus, greater discipline, and greater clarity."

PlayStation's disc-less future could "heavily influence" Xbox and Nintendo's approach to physical games, former Sony boss says, calling the decision "dramatic" .