Xbox To Lay Off 3,200 In ‘Most Significant Restructure’ In Its History

Microsoft’s Xbox division is set to cut roughly 3,200 jobs—about 20 % of its workforce—and will dissolve four of its internal studios, a move the company’s chief executive, Asha Sharma, described as “the most significant restructure in Xbox history.”

Sharma announced that 1,600 employees will be let go today, with the remainder following in subsequent phases. Compulsion Games and Double Fine will transition to independent entities, whereas Ninja Theory and Undead Labs have agreed to new ownership arrangements that will fund the completion and expansion of the Senua saga and the upcoming State of Decay 3. Arkane Lyon is currently undergoing a mandatory French consultation to evaluate its future, leaving its status uncertain.

The restructuring will also affect teams across Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios. Sharma emphasized that none of Xbox’s first‑party, publicly announced titles are being canceled, and she has taken direct oversight of Mojang and King’s operations.

In a candid assessment, Sharma highlighted that Xbox’s current profitability lags 3‑10× behind comparable platform and publishing peers, citing a smaller install base and higher cost structure since the Gen 9 launch. She noted that while Game Pass, multi‑platform releases, and a diversified content portfolio have delivered value, growth has fallen short of expectations, prompting additional teams, investment, and time. With the industry confronting the most severe hardware crisis in its history, she concluded that a reset of Xbox is imperative.

Since 2018, the company has aggressively broadened its studio roster, and the current pace of game releases now eclipses the entire output of the previous decade. This surge has pushed the firm into direct competition with both the biggest publishers and nimble indie developers alike. Recognizing that it cannot feasibly acquire every promising independent studio, the company has come to understand that it is not the ideal home for every creative venture. In fact, a typical fiscal year has seen the company lose 64 cents for every dollar invested, underscoring the need for a more focused strategy. As part of its recalibration, the Xbox division is set to empower indie creators by offering open development tools and access to a broad audience, helping them bring their visions to life.

Additional workforce reductions are slated across the platform teams, with leadership aiming to trim management layers to no more than five—and ideally three—levels. The strategy also includes streamlining tool workflows and cutting vendor spend by half. These measures are part of a broader effort to tighten operational efficiency and reduce overhead.

In a significant leadership shuffle, Helen Chiang—currently serving as Microsoft’s corporate VP and head of Mojang—has been appointed as the new Chief Operating Officer, succeeding Dave McCarthy who is stepping down upon retirement.

Earlier this month, Sharma and Xbox Game Studios head Matt Booty circulated an internal memo outlining the impending cuts. The memo highlighted that the division finished its last fiscal year with a modest 3‑percent profit margin, had invested $20 billion in studios over five years (excluding the $69 billion acquisition of Activision Blizzard King), and faced a revenue dip of nearly half a billion dollars amid soaring component costs. The communication underscored that the studio system had become overextended and was inadequately funded to remain competitive.

Further cost‑saving initiatives have included terminating contracts with several third‑party vendors, a move that has already led to job losses at those external partners. This aggressive restructuring reflects the company’s commitment to streamlining operations and re‑allocating resources toward its core strategic priorities.

Game File reports that the recent studio spin‑outs will see more than 300 Microsoft gaming employees exit the organization.

Sharma claims Microsoft has severely underfunded Minecraft, noting that Roblox has poured in over five times the investment Microsoft has allocated to its own Minecraft venture.

Bloomberg details an upcoming reduction of 6,400 positions across the entire Microsoft corporation—under 3% of its global workforce—of which 4,800 will be eliminated today, including 1,600 from Xbox, with the remaining Xbox departures spread over the coming year.

These cuts arrive roughly a year after a prior round that saw 9,100 employees laid off company‑wide, including 200 from King, the cancellation of a Perfect Dark reboot, the shuttering of The Initiative studio, the scrapping of ZeniMax’s MMORPG, and the termination of Everwild during Rare’s restructuring. That wave followed a 650‑person Xbox layoff, itself just nine months after a 2,000‑person gaming division cut in January 2024.