Xbox Plans Approximately 3,200 Layoffs and Studio Departures in Major Overhaul

Xbox will cut approximately 3,200 positions and separate from four studios in a sweeping reorganization that CEO Asha Sharma described in a staff email as the most significant restructure in Xbox history.

Xbox executes immediate and phased layoffs across multiple divisions. The message, obtained by Kotaku, indicates that 1,600 positions will be eliminated immediately and the balance in coming weeks. Reductions of varying scale will hit teams inside Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios.

Platform groups face additional trimming. Sharma intends to shrink management layers to no more than five, and where possible three. The company also plans to simplify internal tooling and slash vendor spending by 50 percent.

Four studios exit Microsoft ownership under new arrangements. Compulsion Games and Double Fine are transitioning to independent operations. Ninja Theory and Undead Labs have reached agreements to move under fresh ownership backed by capital that will let them finish and expand Senua and State of Decay 3, although terms remain undisclosed.

Arkane Lyon has begun the legally required consultation period in France while its future stays unresolved. According to a Game File report, the studio transitions will remove over 300 jobs from Microsoft’s gaming division.

Sharma cites unhealthy margins, over-expansion, and industry crisis as drivers. In the email Sharma explained that current margins sit 3–10x below those of comparable platform and publishing peers. The company entered the ninth console generation with a smaller installed base and elevated costs. Investments in Game Pass, multi-platform support, and an expanded content slate generated value but fell short of projected growth rates.

As performance lagged, Xbox continued hiring teams and committing resources in hopes of improvement. The email added that the industry is now confronting the most severe hardware crisis in its history, forcing a full reset. Studio acquisitions have accelerated since 2018 even though monthly game releases now exceed the output of the prior decade combined, placing Xbox in competition with both major publishers and small independents.

Sharma wrote that owning every promising independent team “is neither possible nor desirable.” She noted the company has lost 64 cents on average for every dollar invested in a typical year. Going forward the emphasis will shift to supporting outside creators with open tools and access to audiences.

Leadership changes accompany the reset of content and operations. Mojang and King will report directly to Sharma. Helen Chiang, Microsoft corporate vice president and current Mojang leader, will become chief operating officer following the retirement of Dave McCarthy.

In a prior message sent last month by Sharma and Xbox Game Studios president Matt Booty, executives disclosed that the division closed its latest fiscal year with roughly a 3-percent profit margin. The group had invested $20 billion in studios across five years, excluding the $69 billion Activision Blizzard King acquisition, while annual revenue fell by nearly half a billion dollars amid rising component costs. That note characterized the studio organization as “over extended” and “not adequately funded” to remain competitive.

No first-party, publicly announced titles or initiatives will be canceled. Sharma’s stated goal is to reset Xbox.