Microsoft has launched the largest restructuring in Xbox’s history, which will result in the elimination of approximately 4,800 jobs across the company, including around 1,600 employees from the gaming division. Additionally, four Xbox studios will transition to independent management or find new owners.
Xbox head Asha Sharma informed employees that the layoffs will be part of a yearly process of reorganizing the division. In total, Microsoft plans to reduce Xbox’s workforce by roughly 15% by the end of the fiscal year in July 2027. These figures do not include employees from studios that will depart along with the sold teams.
As part of the changes, Double Fine Productions and Compulsion Games will return to independent management. Double Fine founder Tim Schafer will continue to run the studio on his own, while Compulsion Games founder Guillaume Provost will once again lead an independent gaming company. The studios will retain their game projects, intellectual property, and catalogs.
Microsoft has also finalized agreements to sell Ninja Theory, the developer of the Hellblade series, and Undead Labs, the creator of State of Decay. New owners are expected to ensure the continued development of the Senua games and State of Decay 3.
Another project in question is the studio Arkane, which is working on the game Blade. According to Sharma, Arkane’s leadership in France has initiated mandatory consultations with the works council to evaluate potential options for future operations. These discussions could take several months, so the fate of the studio and the project remains undecided at this time.
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The cuts will also impact other Xbox divisions, including Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios. At the same time, Microsoft has stated that it is not canceling any previously publicly announced games or projects from its own studios.
Simultaneously, Microsoft is changing its management structure. Mojang, the creator of Minecraft, and King, the developer of Candy Crush, will now report directly to Asha Sharma. The company explained this by noting that both studios have become major platforms with large player audiences.
Sharma cited the deterioration of the business’s financial performance as the reason for the Xbox restructuring. According to her, the division operates with margins 3 to 10 times lower than comparable gaming platforms and publishing companies. Microsoft previously expanded its studio portfolio, betting on Game Pass, releasing games on multiple platforms, and increasing the number of projects, but these areas did not grow at the expected pace.
After its expansion, Xbox faced the problem of having too many internal teams and projects. According to Sharma, the company realized that it is not the optimal structure for every independent studio: on average, Xbox lost 64 cents for every dollar invested in such areas.
Instead of further expanding the number of studios, Microsoft intends to focus on major gaming franchises and support independent developers through development tools and access to Xbox’s audience.
In addition to changes in gaming teams, Microsoft plans to simplify Xbox’s internal structure. The company will reduce the number of management levels to five or fewer, and in some cases, to three. Xbox also aims to cut spending on external contractors by 50% and consolidate internal development tools.
Another change will be the introduction of the position of Chief Operating Officer for Xbox, responsible for the financial results of all areas—games, hardware, platforms, and services. This role has been given to Helen Chiang, who previously led Mojang and the development of Minecraft.
Microsoft states that the restructuring is intended to prepare Xbox for the next stage of the gaming industry’s evolution. The company plans to maintain its level of investment in the division but will direct funds toward a smaller number of priority projects and aim to return the business to growth by 2027.
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