Microsoft to cut 3,200 Xbox jobs and divest four studios in restructuring

The layoffs

Microsoft is cutting 4,800 jobs across the company, with 1,600 of those in Xbox effective immediately. Over the next fiscal year, Xbox will eliminate an additional 1,600 roles, bringing total cuts to about 3,200, or 20% of the division's workforce. The reductions span nearly every Xbox unit, including Activision, Bethesda, Blizzard, King, Mojang, and Xbox Game Studios. Chief People Officer Amy Coleman said the roles are not being replaced by AI, but that AI is changing how work gets done. More than 30% of eligible employees took a voluntary retirement program, which included healthcare coverage and a cash severance.

Studio divestitures

Four studios will leave Xbox: Ninja Theory and Undead Labs are being sold to undisclosed buyers, while Double Fine and Compulsion Games will become independent under existing management, retaining their intellectual property. A fifth studio, France-based Arkane, is beginning consultations with its Works Council on potential strategic options. The moves are expected to spare about 350 employees from layoffs. No previously announced first-party games are being canceled.

Sharma's diagnosis

In a memo to staff, Xbox CEO Asha Sharma said the business is "not healthy," with margins 3 to 10 times lower than comparable platform and publishing businesses. She noted that platform teams are 40% larger than at the start of the current console generation, even as player base and playtime have declined. Sharma set a goal of doubling Xbox's daily users to one billion.

We have also learned that we are not the best home for every type of studio; in a typical year, we lost 64 cents for every dollar we invested.

Operational reset

Sharma outlined plans to simplify Xbox's structure, reducing management layers from as many as 14 to no more than five, and where possible three. Content spending will remain at record levels over the next fiscal year, but investment will shift toward franchises like Minecraft and Elder Scrolls. The company acknowledged misreading the economic challenges facing the video game industry, which Sharma described as facing "the most severe hardware crisis in its history."