Highlights
- XBOX will cut roughly 3,200 jobs, about 20% of its workforce, through FY27, with 1,600 roles eliminated immediately
- Double Fine and Compulsion become independent studios with their IP; Ninja Theory and Undead Labs have been sold, and Arkane will be divested pending consultation under French law
- Helen Chiang becomes XBOX's first chief operating officer, with Mojang and King now reporting directly to CEO Asha Sharma
XBOX will cut approximately 3,200 jobs and part ways with five of its studios, Microsoft's gaming division confirmed Monday, in what CEO Asha Sharma called "the most significant restructure in XBOX history."
The cuts, estimated at as much as 20% of the XBOX workforce, will roll out through fiscal 2027, beginning with roughly 1,600 role eliminations announced the same day. The confirmation follows weeks of media reports and speculation after Sharma told a Bloomberg Tech conference she planned on "resetting the business" because it was "not in a healthy spot."
Contrary to earlier fears of outright closures, no studios are being shut down and no announced first-party games have been cancelled. Instead, Psychonauts developer Double Fine and South of Midnight studio Compulsion Games will exit XBOX Game Studios as independent developers, keeping their IP, catalog, and funding for their next projects.
Ninja Theory and Undead Labs have been sold to new owners with funding secured to complete Senua and State of Decay 3, though buyers have not been disclosed because the deals are not yet finalized. Arkane, the studio behind Dishonored and Marvel's Blade, will also be divested, with its management beginning a Works Council consultation required under French law before details can be shared.
In a note to staff, Sharma was blunt about the state of the business. XBOX is operating at margins 3-10x lower than comparable platform and publishing companies, she said, and lost 64 cents for every dollar invested in its studio portfolio in a typical year. "It is neither possible nor desirable to own every great independent studio," she wrote. "We have also learned that we are not the best home for every type of studio."
Why XBOX is restructuring: layoffs, management cuts, and a Bethesda overhaul
The restructure extends beyond the studio system. Sharma said work in some parts of the company passes through as many as 14 layers of management, and platform teams have grown 40% larger since the start of the current console generation even as the player base declined. XBOX will flatten management to no more than five layers and cut vendor spend by half. The reset has already reshaped external publishing plans, with XBOX ending its Project Fantasy deal with IO Interactive last week.
Reductions will vary across Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and XBOX Game Studios. According to Bloomberg, Bethesda will undergo a significant overhaul and pivot to its biggest franchises: Fallout, The Elder Scrolls, Doom, Quake, and Wolfenstein.
Monday's announcement caps a turbulent stretch for XBOX leadership. Chief content officer Matt Booty had told staff in February that no organizational changes were underway following Phil Spencer's retirement, while XBOX Game Studios head Craig Duncan and chief of staff Louise O'Connor reportedly exited last month as layoff concerns grew.
Sharma also announced structural changes at the top. Helen Chiang, a near two-decade XBOX veteran who previously led Mojang and the Minecraft franchise, has been promoted to the company's first chief operating officer role, with end-to-end profit-and-loss responsibility across content, hardware, platform, and services. Mojang and King will now report directly to Sharma, while platform veteran Dave McCarthy retires after 17 years.
"These changes are about a bigger future for XBOX, not a smaller one," Sharma wrote, adding that the company will return to growth in 2027.
