Microsoft CEO Satya Nadella has publicly endorsed the ongoing restructuring of Xbox, describing the company’s studio closures and workforce cuts as “great to see” during a wide-ranging interview. The remarks come as the gaming division pushes through what has become one of the most aggressive reorganisations in its history under new CEO Asha Sharma, with developers like Double Fine, Compulsion Games and Undead Labs shut down, Obsidian folded into Bethesda, and Halo’s future handed to another studio. Speaking via a podcast interview, Nadella also expressed confidence in Xbox’s intellectual property portfolio and signalled that the company expects growth in the coming fiscal year.
The comments arrive at a sensitive moment for the platform. Sharma has been the public face of the restructuring, defending the cuts with rhetoric that has drawn sharp criticism from the industry. “Great technology gets better when it gets simpler, not bigger,” she has said, a line that has become something of a rallying cry for the company’s consolidation strategy. Yet the human cost of that philosophy has been substantial, with thousands of employees across the gaming division losing their jobs in waves over the past year.
Nadella, who oversees Microsoft’s broader ambitions beyond gaming, approached the topic with measured optimism. “I feel fantastic about the IP we have right now,” he stated. “If I look at the studios, the IP portfolio we have, and our ability to then take that and produce great games going forward, I feel fantastic.” The emphasis on the studio portfolio suggests a strategy of consolidation rather than expansion — fewer teams, but ones the company believes are better positioned to deliver on its core franchises.
A Formula 1 Metaphor for a Painful Process
When pressed on the studio reorgs and the layoffs that have left so many jobless, Nadella framed the exercise as a matter of engineering rather than attrition. “There’s some amount of streamlining the team is doing, and Asha is doing, which is great to see,” he said, likening the effort to designing a new Formula 1 car. The comparison implies that the cuts are a deliberate, calculated part of a larger performance overhaul — a narrative that aligns neatly with Sharma’s “simpler, not bigger” thesis.
That framing, however, glosses over the immediate reality for the thousands of employees affected. The restructuring has reshaped Xbox’s studio landscape in ways that will take years to fully play out. Obsidian Entertainment, long associated with franchises like The Outer Worlds and Pillars of Eternity, has been absorbed into Bethesda. Meanwhile, Halo — the flagship franchise that has defined Xbox for two decades — is being restructured under a new leadership arrangement, while Double Fine and Compulsion Games have been quietly shut down. Undead Labs, the studio behind State of Decay, has also fallen, and Ninja Theory is expected to close.
“There’s some amount of streamlining the team is doing, and Asha is doing, which is great to see.”
Satya Nadella, Microsoft CEO
For the community, the disconnect between executive optimism and ground-level disruption remains stark. Fans of the affected studios have expressed concern over the loss of creative teams and the uncertainty surrounding beloved franchises. The consolidation strategy risks concentrating development resources in ways that could stifle the diversity of voices that have historically defined Xbox’s identity.
Looking Ahead
Despite the bleak near-term picture, Nadella pointed to a longer-term vision for the platform. “Then we have to invent the right sustainable business model that allows us to deliver gaming to more and more people,” he said. “That has always been the goal, which is, we want to be a great publisher and a great platform provider to games across both PC and Xboxes.” He added that Xbox is expected to see growth in the next fiscal year, a claim that will be closely scrutinised as the dust settles on the current round of cuts.
Importantly, this is not the final chapter of the restructuring. When the most recent layoffs were announced, Xbox Chief Creator Officer Matt Booty noted that the company was “roughly three-quarters of the way through previously announced restructuring.” That statement makes clear that further studio closures, role eliminations, and organisational shifts are likely to come. The question for Xbox now is whether the consolidation will ultimately deliver the streamlined efficiency its leadership promises, or whether it will fracture the creative ecosystem that has made the platform a force in gaming for over two decades.
As Nadella and Sharma continue to chart Xbox’s course, the industry will be watching closely — not just the numbers, but the studios, the franchises, and the people who make them all possible.
For a full rundown of the titles expected to shape the coming years, check out our 2026 games guide, while our best PC games list and free PC games roundups are worth revisiting. If you’re after the finest FPS games, grand RPGs, or the best co-op games, we’ve got you covered.
Join the conversation