Xbox is cutting about 3,200 jobs through June 2027, starting with 1,600 today. Four studios are leaving the company, with Double Fine and Compulsion Games going independent and Ninja Theory and Undead Labs moving to new owners, while Arkane's future is under review.
CEO Asha Sharma laid out the plan in a note to staff on Monday, July 6, 2026, and called it the biggest restructure in Xbox history. Xbox has announced no studio closures, and none of the announced games from its own studios are being cancelled.
What happens to the five studios
- Double Fine (Psychonauts, Keeper) and Compulsion Games (South of Midnight) return to independence. Both keep the rights to their franchises and existing games and receive funding to start their next projects.
- Ninja Theory (Hellblade, Senua) and Undead Labs (State of Decay) have agreed terms to join new owners, with funding to finish Senua and State of Decay 3. The buyers are not named, and according to The Game Business the deals have not closed yet.
- Arkane Lyon, the French team behind Dishonored and Deathloop and now working on Marvel's Blade, has begun a legally required consultation with its works council, the employees' representative body, to review its options. The Game Business reports that Xbox hopes for an outcome similar to the other four.
Senua and State of Decay 3 are both scheduled for 2027, according to The Game Business. After reports in June that several of these studios could be shut down, I expected worse.
Where the job cuts land
The first 1,600 job cuts take effect today. The rest are planned through the end of Microsoft's fiscal year on June 30, 2027. Sharma's note says the reductions reach Activision, Bethesda/ZeniMax, Blizzard, King, Mojang and Xbox Game Studios in different sizes. It does not name individual teams.
According to The Game Business, Xbox's platform business, which covers consoles, Game Pass and cloud streaming, takes some of the biggest cuts. Sharma wrote that she wants fewer layers of management so decisions move faster.
Bloomberg reports that Bethesda will also be overhauled and will concentrate on Fallout, The Elder Scrolls, Doom, Quake and Wolfenstein. Sharma's note does not mention this.
Mojang (Minecraft) and King (Candy Crush) now report directly to Sharma. Xbox also has its first chief operating officer, Helen Chiang, who previously led Mojang.
Why Xbox is resetting
Sharma wrote that Xbox's business today is "not healthy." She said Game Pass, multiplatform releases and a broader game lineup created value but grew more slowly than expected, and that the industry is dealing with a severe hardware crisis. Xbox also expanded its studio portfolio quickly after 2018, she added, and now competes with small independent developers as well as large publishers.
Sharma says Xbox will still invest as much as ever this year, with a tighter focus, and expects the business to return to growth in 2027.
The move follows a June 10 memo from Sharma and chief content officer Matt Booty on Xbox Wire that announced a reset of the business. Reports at the time said major layoffs were planned for July.
Xbox has not named the buyers of Ninja Theory and Undead Labs, and Sharma's note gives no dates for those deals to close or for the outcome of Arkane's consultation.
