Xbox Confirms 3,200 Layoffs, Compulsion and Double Fine Go Independent
Xbox CEO Asha Sharma has confirmed the console maker will cut roughly 3,200 jobs through its 2027 fiscal year while cutting ties with four development studios, in what she called “the most significant restructure in Xbox history.” Compulsion Games and Double Fine Productions are being spun back out as independent studios, while Ninja Theory and Undead Labs are being sold to new owners, according to a memo confirmed by multiple outlets including Kotaku, Variety and CNBC.
This email, shared with Kotaku, says that 1,600 of those layoffs will take place today, while the rest will take place later. CNBC confirmed the wider context: Microsoft said Monday it is immediately eliminating 4,800 jobs, representing 2.1% of its workforce, with its Xbox division set to lose about one-fifth of its staff, including 1,600 jobs on Monday and additional cuts in the coming months.
Double Fine and Compulsion Regain Independence
Of the five studios caught up in the reset, two get what most in the industry would consider the best available outcome. Compulsion Games and Double Fine Productions will return to management and transition to independent studios with their IP, catalog, and runway for their next games. Both studios keep full ownership of their back catalogues and any future revenue those games generate.
Double Fine founder Tim Schafer confirmed the split on social media, writing “Once again, Double Fine Productions will be an independent studio,” and adding thanks “to everyone at Xbox for seven great years together, and for working with us to reach an outcome which preserves our history and culture, and returns ownership of our games to us.” Compulsion Games, the Montreal studio behind South of Midnight and We Happy Few, posted its own statement confirming it will “return to independent management following our time as part of Xbox.”
Ninja Theory and Undead Labs Sold, Arkane Lyon in Limbo
Not every studio gets to walk away independent. Ninja Theory and Undead Labs “have entered terms to join new ownership with funding to complete and grow Senua and State of Decay 3,” though the specifics of that have not yet been disclosed. Both are still expected to release their in-development titles under whichever buyer takes them on.
A fifth studio faces the murkiest path. Arkane Lyon is entering legally required “consultation” in France to review its options, and its fate remains unclear. The Dishonored and Deathloop developer is currently working on Marvel’s Blade, and French labour protections mean any resolution there is likely to take considerably longer than the other four cases.
Sharma Says Xbox “Lost 64 Cents For Every Dollar” Invested
Sharma’s memo frames the divestitures as a reversal of years of aggressive acquisition. Since 2018, Xbox aggressively expanded its studio portfolio while the number of games created each month across the industry now outpaces the last ten years combined, and the company found itself competing not only with the largest publishers but also with smaller independent studios, concluding it is neither possible nor desirable to own every great independent studio, and that in a typical year it lost 64 cents for every dollar invested.
The cuts extend beyond the five named studios. The layoffs will affect almost every division at Xbox, varying in size across developers including Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios. Sharma also confirmed none of the first-party publicly announced games or projects are being cancelled as a result of the staffing reductions.
Helen Chiang Named Xbox’s First Content-to-Platform COO
Alongside the layoffs, Sharma is restructuring Xbox’s top ranks. For the first time, Xbox is establishing a Chief Operating Officer with end-to-end P&L responsibility across content, hardware, platform, and services, with Helen Chiang promoted to the role and reporting directly to Sharma. Chiang replaces Dave McCarthy, who Sharma thanked after 17 years with Xbox as he retires. Mojang and King, meanwhile, will now report directly to Sharma herself, reflecting their scale as some of Xbox’s biggest properties by active players.
Sharma is also flattening Xbox’s org chart more broadly, aiming to “reduce management layers to no more than 5, and where possible, 3,” while cutting vendor spending significantly.
A Fifth Round of Cuts Since the Activision Blizzard Deal
Monday’s announcement is not an isolated event. The layoffs land almost one year to the day after a previous wave of huge cuts at Microsoft that impacted 9,100 individuals company-wide, which itself came less than a year after an earlier mass layoff of 650 across Xbox, following a layoff of nearly 2,000 across the gaming division in January 2024. Communications Workers of America, which represents thousands of Microsoft gaming staff, had publicly pushed back against the restructuring in the days before the cuts landed.
For Australian and New Zealand players, the immediate console lineup and Game Pass catalogue are unaffected, since Sharma explicitly ruled out cancelling announced titles. The bigger question for the region is what independence means for future ports and pricing once Compulsion and Double Fine start self-publishing, and whether new owners keep State of Decay 3 and the next Hellblade tied to Xbox and Game Pass exclusivity once those studios change hands.
Read also: Id Software Says Xbox Layoffs Shrank Studio to DOOM 2016-Era Size
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