Xbox Is Laying Off 3,200 Employees & Giving 4 Studios New Management
1,600 workers are saying goodbye to their teams today.
Bangla press, Shutterstock
If you suspected that Xbox's new CEO, Asha Sharma, was trying to butter up players by giving away consoles and lowering Game Pass prices as a precursor to some devastating news, I guess you can pat yourself on the back: Sharma announced that 3,200 people will be laid off as part of the company's most “significant” restructure.
As reported by IGN, 1,600 of them are leaving today, and 4 studios will be leaving for new management, as rumors stated earlier.
"I know this is painful. These changes will directly affect people who have poured their creativity into building XBOX. Many joined us through acquisitions, while others were recruited here, or sought us out because they loved this industry and loved XBOX. Today's decisions do not reflect their talent or dedication.
"Our business today is not healthy. We are operating at margins that are 3–10x lower than comparable platform and publishing businesses. We entered Gen 9 with a smaller install base and a higher cost structure. To grow, we bet on Game Pass, multi-platform, and a broader portfolio of content. While those businesses have created meaningful value, they did not grow at the pace we expected. As that happened, our core business weakened, and we added more teams, more investment, and more time, hoping for a better outcome. And now the industry is facing the most severe hardware crisis in its history. We must reset XBOX."
The studios in question are Compulsion Games (South of Midnight), Ninja Theory (Hellblade), Undead Labs (State of Decay), and Double Fine (Psychonauts).
Compulsion and Double Fine will return to management and transition to independent studios with their IP, catalog, and "runway for their next games." Ninja Theory and Undead Labs will join new ownership with funding for Senua and State of Decay 3.
Moreover, Arkane (Dishonored) is "beginning required consultation with its Works Council to review potential strategic options."
Xbox is cutting its workforce across Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios as well, but Microsoft says that its first-party publicly announced projects aren't being cancelled as part of this initiative, so you will see Fable, Gears of War: E-Day, Call of Duty: Modern Warfare 4, and The Elder Scrolls 6. Hopefully.
Microsoft was laying off people left and right in 2025, and the trend continues, as tragic as it is.
Other components of the Xbox reset include process simplification:
"We will reduce management layers to no more than 5, and where possible, 3. We will deliver success through a flatter organization that is built around makers (individual contributors focused on building), player-coaches (leaders who remain deeply involved in the work while developing their teams), and directly responsible individuals (DRIs) who own key decisions and outcomes. And we will streamline how we work across our tools, with a cleaner code base, shared services, and 50% reduced vendor spend."
Xbox
Finally, the company is introducing a Chief Operating Officer "with end-to-end P&L responsibility across content, hardware, platform, and services" – a role given to Helen Chiang, who has worked on Xbox Live and led Mojang and the Minecraft franchise for nearly 20 years.
"I want XBOX to be one of the few companies that entertains more than a billion people each day and gives everyone the opportunity to create and connect. I know we can achieve this goal. XBOX has many of the most beloved franchises in entertainment history, talented studios around the world, and we will return to growth in 2027.
"History is full of companies that mistake longevity for inevitability. We will not be one of them."
Considering the fact that Xbox has long been struggling in the battle of consoles, this decision isn't surprising. Sharma posted the email she sent to her employees on X/Twitter, so at least she didn't try to hide the uncomfortable truth.
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