Xbox Cuts 3,200 Jobs, Half Today in “Most Significant Restructure” Yet
Xbox is cutting roughly 3,200 jobs — about 20 percent of its workforce — through its 2027 fiscal year, with 1,600 of those roles eliminated immediately on Monday. Xbox CEO Asha Sharma described the overhaul in an internal memo as “the most significant restructure in Xbox history,” confirming that four studios will leave Microsoft’s gaming division entirely.
The Xbox cuts sit inside a wider reduction at Microsoft, which said Monday it is immediately eliminating 4,800 jobs, representing 2.1% of its workforce, in the software giant’s latest effort to cut costs in the era of artificial intelligence. According to CNN, the company plans to cut about 3,200 jobs from its Xbox division throughout the 2027 fiscal year, with 1,600 roles being eliminated today, the company’s Xbox CEO Asha Sharma said in a post on X.
3,200 Roles Gone Across FY27, With 1,600 Cut on Day One
Per Sharma’s own memo, obtained and published in full by Kotaku, Xbox is preparing to lay off approximately 3,200 of its employees (roughly 20% of the division) and part ways with four of its studios. She wrote directly to staff, “This will include approximately 1,600 role eliminations today, and in addition, four studios will leave XBOX to new management… I recognize that a year-long restructuring creates additional challenges. Unfortunately, it is not possible to make all the necessary changes in a single day, and I wanted to be direct about the scale.”
The cuts will land across nearly every part of Xbox’s portfolio. Variety reports that the layoffs will affect almost every division at Xbox, but will vary in size across developers including Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios. Despite the scale, Sharma stated that none of Xbox’s publicly announced first-party games are being cancelled as a result of the restructuring.
Compulsion, Double Fine Go Independent; Ninja Theory, Undead Labs Sold
Four studios are exiting the Xbox first-party family altogether. CNBC reports that the Compulsion Games and Double Fine Productions studios, which Microsoft acquired in the 2010s, will become independent again, while Ninja Theory and Undead Labs, which joined Microsoft in 2018, “have entered terms to join new ownership”. Double Fine itself reacted publicly, with the studio posting on X that it was “thankful 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.”
Crucially, the games already in production at the departing studios aren’t being scrapped. Ninja Theory’s Hellblade follow-up and Undead Labs’ State of Decay 3 are understood to be continuing under the new ownership arrangements, even though they will no longer ship as Xbox first-party titles.
Arkane Lyon’s Future Left Open Under French Consultation Rules
A fifth studio’s status remains unresolved. Kotaku notes that Arkane Lyon is entering legally required “consultation” in France to review its options, and its fate remains unclear. CNBC adds that France-based Arkane Studios, which arrived at Microsoft through the $8.1 billion ZeniMax Media acquisition in 2021, is in touch with its works council regarding strategic options, a legal formality required before major restructuring decisions can be finalised for French-based staff.
Analyst reaction to the broader Xbox retreat has been blunt. DA Davidson’s Gil Luria told CNBC that “this is not a business Microsoft needs to be in, or should be in,” adding “it is very possible that they will spin it off at some point.”
Sharma Cites Margins “3-10x Lower” Than Rival Platforms
Sharma, who took over as Xbox CEO from the retiring Phil Spencer in February, framed the restructure as a response to years of unsustainable economics rather than a single bad quarter. According to Variety’s reproduction of her staff memo, she wrote that “our business today is not healthy” and that Xbox is “operating at margins that are 3-10x lower than comparable platform and publishing businesses.” She closed by insisting “I know we can achieve this goal. Xbox has many of the most beloved franchises in entertainment history, talented studios around the world, and we will return to growth in 2027. History is full of companies that mistake longevity for inevitability. We will not be one of them.”
NBC News reports that Sharma had flagged the profitability problem even before the cuts were announced, noting the business needed a “reset” and that its profit margin had declined to 3%, forcing a restructuring that could include potential mergers and acquisitions. As part of the shake-up, Mojang and King leadership will now report directly to Sharma, while Helen Chiang steps up to Chief Operating Officer as Dave McCarthy retires from the role.
Hardware Cost Pressure Adds to Xbox’s Turbulent Year
The restructuring lands alongside separate hardware cost pressures already being felt by Xbox owners worldwide, including in New Zealand and Australia. CNN reports that Xbox console prices will climb by $100-$150 depending on the model as of August 1, with Sharma telling staff “the industry is facing the most severe hardware crisis in history.” That US pricing shift is tied to a global memory-chip shortage, meaning Australian and New Zealand shoppers should expect comparable increases when local retailers adjust console pricing later this year.
For Game Pass subscribers across the Tasman, the restructuring is unlikely to change day-to-day service access in the short term, but it does signal a narrower first-party release slate ahead, with Microsoft steering investment more heavily toward franchises like Halo, Minecraft and the Elder Scrolls series rather than the broader stable of smaller studios it spent years acquiring.
Read also: id Software: Studio Still Has “Crew We Need” Despite Xbox Layoffs
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