Xbox’s Second Wave Of Planned Layoffs Is Reportedly Starting As Studios Face Major Restructuring

Microsoft’s Xbox division is reportedly on the brink of a second wave of job cuts, with new reports suggesting that the company is set to begin another round of approximately 1,600 layoffs soon while simultaneously restructuring its gaming business by consolidating several of its first-party studios. The move ties directly into plans announced by Xbox boss Asha Sharma to slash 3,200 roles from the division, and comes as the tech giant pursues a broader strategy to make its gaming arm more profitable. According to sources, the restructuring is part of a deliberate effort to streamline operations and concentrate resources on the company’s most valuable franchises.

The latest developments build on a first wave of 1,600 mass layoffs that began in July, marking what could become one of the most significant periods of change in Xbox’s modern history. The scale of the cuts reflects Microsoft’s stated intention to shed roughly 20% of its Xbox workforce over the coming period, a figure that underscores the depth of the transformation underway. As the company recalibrates its portfolio, the ripple effects are already being felt across its studio ecosystem, with several long-standing teams either departing or being reorganized.

A Restructuring That Reaches Into Iconic Franchises

According to The Information, which cites a Microsoft source who briefed it on the company’s plans, the second wave of 1,600 job cuts is expected to start soon. The report paints a picture of a company in active transition, one that is not only trimming headcount but also reshaping how its studios are organized and which properties they steward.

Prolific leaker NateTheHate has amplified these claims, alleging that the Halo franchise is being moved to Activision Blizzard, with similar reorganizations reportedly planned across the wider division. If these reports hold any truth, 2026 could mark a year of profound upheaval for Xbox, as the company redefines its relationship with some of its most celebrated intellectual properties.

Since Sharma stepped in to run the division, the goal has been to make it more profitable as part of a “reset” initiative that has seen scores of jobs slashed over the last couple of months.

Xbox Leadership

The consolidation strategy appears designed to give the company greater control over its flagship titles while reducing overhead. This approach mirrors a broader trend across the industry, where publishers increasingly favor focused, high-impact development over sprawling portfolios. For Xbox specifically, the emphasis is shifting toward its biggest franchises, with Bethesda recently confirming that Fallout 5 and remasters of Fallout 3 and Fallout: New Vegas are in the works.

Studios Depart, and the Workforce Shrinks

The human cost of this restructuring is becoming increasingly apparent. Xbox has already seen several of its first-party studios leave the organization. Double Fine Productions and Compulsion Games have both become independent studios again, while State of Decay 3 developer Undead Labs and Senua’s Blade studio Ninja Theory have also been sold off.

Meanwhile, Arkane Lyon is reportedly looking to divest itself from Microsoft once it finishes a mandatory consultation period with the French Local Works Council. These departures, combined with the layoffs, signal a decisive pivot away from the company’s previous model of owning and operating a large number of studios in-house.

The impact on remaining teams has been severe. Studios such as id Software and Zenimax Online have been hit hard by the layoffs, as part of Microsoft’s plans to shed approximately 20% of its Xbox workforce. The uncertainty surrounding these changes is likely to weigh heavily on the creative teams tasked with delivering the next generation of Xbox-exclusive and first-party titles.

Looking Ahead

If the reported timeline holds, 2026 will define itself as a pivotal year for Xbox, one in which the company attempts to emerge leaner, more focused, and more commercially viable. The combination of mass layoffs, studio departures, and franchise realignment suggests a fundamental rethinking of the division’s long-term strategy.

For players and industry observers alike, the coming months will be crucial in determining whether this restructuring delivers the promised profitability or simply adds to a growing list of concerns about the future of Xbox’s creative output. As the dust settles on these announcements, the question of how Microsoft will balance cost-cutting with the preservation of its beloved franchises will remain at the forefront of the conversation.