Xbox Layoffs Begin: 1,600 Cut Today, 3,200 Total Planned This Year
Microsoft has begun the largest restructuring in Xbox’s history, cutting 1,600 jobs immediately with a total of roughly 3,200 positions set to disappear from the gaming division by the end of fiscal year 2027. Xbox CEO Asha Sharma confirmed that of Monday’s 4,800 layoffs at Microsoft, 1,600 hit Xbox directly, with about 3,200 cuts in total expected through fiscal year 2027. The reduction amounts to roughly one-fifth of the division’s global workforce.
1,600 Jobs Gone Today, 1,600 More Through FY27
Xbox will be cutting a total of 3,200 people, with half of those roles part of the 4,800 jobs eliminated Monday and the other 1,600 people exiting throughout fiscal year 2027, Sharma wrote in an email to division employees. In her memo, she did not shy away from the scale of the disruption still ahead. “I recognize that a year-long restructuring creates additional challenges,” Sharma wrote, adding “Unfortunately, it is not possible to make all the necessary changes in a single day.”
The cuts sit inside a much larger Microsoft reduction. Microsoft 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. The cuts amount to 20% of Xbox employees, according to a person familiar with the matter.
Double Fine, Compulsion Games Go Independent; Ninja Theory, Undead Labs Sold
Beyond headcount, Xbox is also shedding four studios entirely. Microsoft will transition four of its gaming studios to operate under new management, with Compulsion Games and Double Fine Productions returning to independent studios, while Ninja Theory and Undead Labs come under new ownership with funding to complete and grow some of their more popular games. Double Fine, the “Psychonauts” studio led by Tim Schafer, framed the split warmly on social media, with the developer saying “We’re 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.”
A fifth studio’s fate remains unresolved. 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, Sharma wrote. Under French labour law, any changes affecting the Lyon studio must go through a formal consultation process before they can take effect.
Sharma: Xbox “Operating at Margins 3-10x Lower” Than Rivals
Sharma, who succeeded longtime Xbox chief Phil Spencer earlier this year, was blunt about the division’s financial health. Calling this “the most significant restructure in Xbox history,” she wrote, “Our business today is not healthy,” adding, “We are operating at margins that are 3–10x lower than comparable platform and publishing businesses.” She pointed to the strategy Xbox had bet on to grow the business. Sharma added that Xbox made bets like its monthly subscription service Game Pass, alongside moves to grow its portfolio of content and invest in multiplatform, among other attempts to breathe life into the business.
The hardware side of the business came in for particularly stark language. “And now the industry is facing the most severe hardware crisis in its history,” Sharma said, “We must reset Xbox.” Beyond people and studios, the reset targets Xbox’s internal bureaucracy. According to Sharma’s memo, Xbox is flattening management from 14 layers to no more than five, ideally three, while longtime executive Helen Chiang has been made chief operating officer with end-to-end profit and loss authority across content, hardware, platform, and services.
Minecraft and Elder Scrolls Named as Priority Investments
Even as jobs disappear, Xbox insists overall content spending will hold roughly steady. Throughout Xbox’s next fiscal year, which runs July 1, 2026, to June 30, 2027, the company will see approximately the same content spend as it did over the prior year, which was a record for Xbox, with titles including Minecraft and the Elder Scrolls franchise being prioritized as major growth areas, a source told Variety. The same source suggested other teams have been squeezed to fund that push. The insider said Xbox has been “using Minecraft as a funding source” for other studios and that Mojang has “not been given the funding it needs to grow,” while for Elder Scrolls, which has not released a new game since 2011, Xbox will be “reallocating” teams and funding toward producing new projects.
Leadership lines are also being redrawn. As part of the overall restructuring, leadership at Minecraft maker Mojang and Candy Crush developer King will now report directly to Sharma.
Fourth Straight Year of Gaming Cuts as Microsoft Chases AI Spending
Monday’s announcement extends a grim run for Microsoft’s gaming arm. By comparison, the company last year cut more than 15,000 jobs globally in two rounds of layoffs in spring and summer 2025 — the largest reductions in more than a decade. Analysts see the writing on the wall for Xbox’s standalone future. “This is not a business Microsoft needs to be in, or should be in,” DA Davidson analyst Gil Luria said, adding “It is very possible that they will spin it off at some point.”
For players in New Zealand and Australia, the cuts land at a delicate moment for the platform, as Xbox continues pushing first-party titles onto PlayStation and Switch 2 while wrestling with a global memory-chip shortage that has already pushed up console prices across the region. With Game Pass, Minecraft and Elder Scrolls singled out as the properties Xbox is betting its future on, local subscribers are likely watching to see whether service tiers, pricing or release-day availability shift as the “reset” plays out over the coming fiscal year.
Read also: Id Software Says Xbox Layoffs Shrank Studio to DOOM 2016-Era Size
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