XBOX Studios Could Face Layoffs After Asha Sharma’s Shakeup, Obsidian Founder Warns

Xbox is navigating a pivotal restructuring phase following Phil Spencer’s departure and the appointment of Asha Sharma, who has been steering the division for roughly a hundred days. The company is poised to enact sweeping changes in a bid to steer itself away from one of its most turbulent chapters, and even its most celebrated studios may not be immune to workforce reductions.

According to Obsidian’s co‑founder, teams within Microsoft that were once considered insulated could soon find themselves on the chopping block, with rumors pointing to personnel cuts slated to begin in July. The atmosphere inside the tech behemoth is thick with uncertainty.

Bloomberg’s Jason Schreier reported that Microsoft is gearing up for a wave of large‑scale layoffs that would take effect shortly after the company’s fiscal year closes on June 30. Asha Sharma later released a letter addressed to employees, yet she sidestepped the speculation surrounding the impending cuts.

Tom Warren of The Verge warned that the downsizing will reverberate through Xbox Game Studios, with the possibility that several teams could shutter as part of the broader reorganization. At present, the studios most at risk remain unidentified.

Unfortunately, it appears that no one is immune to the corporate guillotine, says Chris Avellone, co‑founder of Obsidian Entertainment. In a personal social‑media post, he warned that even teams once considered safe are now at risk.

Avellone explained that Microsoft studios previously assured they would be protected from layoffs are now receiving a different message after recent announcements. Those once deemed “safe” are being told that changes in management could impact their projects, leaving employees uncertain about their future.

He added that uncertainty looms even for Xbox titles that have consistently delivered under Microsoft’s stewardship. The implication is stark: a hit game or a strong reputation no longer guarantees protection from cuts.

Avellone remains unsure whether layoffs will actually occur or when they might happen, but he urges anyone who feels vulnerable to reach out and share their résumé, offering a lifeline amid the looming crisis.

Unexpectedly, the timing and scope of the rumored layoffs remain unclear. Chris Avellone’s comments arrived just before the announcement that Craig Duncan, the head of XBOX Game Studios and overseer of Obsidian, Halo Studios, and other internal teams, had stepped down from his position.

At present, it is still unknown which teams might be targeted for staff reductions. Just a few days ago, Rhys Elliott, chief of Alinea Analytics, warned that units that are “glittering in reputation but poor in numbers” are the most likely to close their doors.

Elliott further noted that even small, critically acclaimed studios could be at risk, as they are hard to justify during margin reviews. Consequently, there is growing concern that studios like Double Fine and Ninja Theory might face massive layoffs or even permanent shutdowns. While this remains speculation, the industry has already begun sounding the alarm.

So, which teams do you think are at risk? Let us hear your thoughts in the comments section.

In a new video feature, Phil Spencer is put under the microscope—debated as either a hero or a villain—while his tenure as Xbox’s former director is dissected to highlight his most notable triumphs and missteps.