Microsoft Cuts 3,200 Xbox Jobs and Drops Four Game Studios in Massive Reset

Microsoft is kicking off the biggest restructure in Xbox history, a round of cuts that will wipe out roughly 3,200 jobs by the end of the 2027 fiscal year. The changes include 1,600 layoffs happening today, plus four well-known game studios leaving Xbox for new ownership.

Xbox CEO Asha Sharma broke the news in a memo to staff around the world (titled “resetting Xbox”), pointing to thin profit margins, a smaller console base at the start of this generation, and a rough stretch for gaming hardware across the whole industry. Her bets on Xbox Game Pass and going multi-platform to grow the business didn’t pan out the way the company hoped.

“Our business today is not healthy,” Sharma wrote, noting Xbox is running at margins three to 10 times lower than comparable companies.

Content Portfolio Changes

To tighten up what it makes in-house, Xbox is cutting ties with several studios, including a Canadian location. Montreal-based Compulsion Games and Double Fine Productions are both going back to independent, keeping their IP, their game catalogues and the runway to build their next games. Ninja Theory and Undead Labs are moving to new, unnamed owners with the funding lined up to finish Senua and State of Decay 3. And Arkane’s studio in France is starting mandatory consultations with its local Works Council to look at its options.

More cuts are landing across Activision, Blizzard, King, Mojang and Bethesda/ZeniMax. That said, Xbox says none of its publicly announced first-party games are getting cancelled. As part of the shuffle, Mojang and King will now report straight to Sharma.

Flattening Out the Structure

A big goal here is stripping out corporate bloat. Xbox says some parts of the company are running with as many as 14 layers of management. Going forward, it wants to cap that at five layers, and just three wherever it can.

The platform team is also focusing on a cleaner code base and cutting vendor spending in half to deal with a shrinking player base and less overall playtime.

New Leadership Structure

To pull its scattered divisions together, Xbox is creating a Chief Operating Officer role with full profit and loss responsibility across hardware, content, platform and services. Helen Chiang, a 20-year Xbox veteran who used to run Mojang and the Minecraft franchise, is stepping into the job.

At the same time, 17-year Xbox veteran Dave McCarthy is retiring. Even with all the cuts, leadership says overall funding for Xbox this year is still at record highs, with the goal of getting the business back to growth by 2027.

That’s a big number of job cuts, and it’s not looking good out there for the people facing job losses, especially at Montreal’s Compulsion Games.