Xbox to Cut 3,200 Jobs and Divest Five Studios in Major Reset

Microsoft's Xbox division is undergoing its most significant restructuring ever, cutting 3,200 jobs — roughly 20% of its workforce — and divesting five game studios. The moves, announced by new Xbox CEO Asha Sharma, are part of a "reset" aimed at reviving a struggling business that operates at margins "3-10x lower than comparable platform and publishing businesses" Source: The Verge.

The layoffs

Half of the 3,200 cuts (1,600 roles) are effective immediately, with the remainder expected by the end of Microsoft's fiscal 2027 Source: Ars Technica. The layoffs affect teams across Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios, though Sharma said no publicly announced first-party games are canceled Source: Gizmodo.

Studio divestments

Four studios are leaving Xbox outright: Compulsion Games and Double Fine will return to independent operation with their IP and funding; Ninja Theory and Undead Labs will be sold to new owners, continuing work on Senua and State of Decay 3 Source: Tom's Hardware. Arkane Studios in France has entered consultation over its future Source: Engadget.

Financial pressures

Sharma revealed that Xbox "lost 64 cents for every dollar we invested" in a typical year Source: The Next Web. The division had bet heavily on Game Pass and a broad portfolio, but those bets underperformed while the industry faces a "severe hardware crisis" Source: Los Angeles Times. Meanwhile, Mojang (Minecraft) and King (Candy Crush) will now report directly to Sharma, and Helen Chiang has been appointed as Xbox's first COO Source: Engadget.

These changes reflect a broader effort to flatten management layers, with Sharma aiming for no more than five levels of decision-making Source: Ars Technica. Microsoft is also cutting about 4,800 roles across the rest of the company Source: The Verge.