Xbox, once a true pretender to the video game console throne, has fallen into uncertainty and corporate shakeups. After longtime CEO Phil Spencer stepped down in the spring, his successor, Asha Sharma, once Microsoft’s AI wonk, promised a bright future for the company. Fresh off the Fourth of July long weekend, Sharma instead announced a massive round of layoffs and Xbox divesting from five of its subsidiary studios. Sharma called it in an email to employees (and a post on X), “the most significant restructure in Xbox history.” (h/t TheVerge.)
The layoffs will amount to around 20% of the company’s workforce. These cuts will happen in two goes. First, 1,600 people will lose their jobs today, then another 1,600 by end of June 2027.
“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,” says Sharma. “I know this is painful. These changes will directly affect people who have poured their creativity into building Xbox. Many joined us through acquisitions, while others were recruited here, or sought us out because they loved this industry and loved Xbox. Today’s decisions do not reflect their talent or dedication.”
As for studios, Double Fine and Compulsion Games will revert to their founders, with both planning to go independent. Two others, Ninja Theory, the makers of Hellblade, and Undead Labs, the developers behind State of Decay, will go up for sale. Microsoft is reportedly also deciding whether to sell or close Arkane Studios, creators of the beloved Dishonored series as well as Prey and Deathloop. The French studio is, however, coming off of the cataclysmic release of Redfall, a multiplayer first-person shooter. They’ve also spent years working on a Blade game with Marvel which keeps pushing back and has gone way over budget.
“In France, Arkane’s management is beginning required consultation with its Works Council to review potential strategic options,” says Sharma.
And evidently Bethesda, by far Microsoft’s largest subsidiary studio, will feel the layoffs more than others. Minecraft maker Mojang and Candy Crush developer King will both now report directly to Sharma. “These changes vary in size across Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios,” says Sharma. “None of our first party publicly announced games or projects are being cancelled as part of these reductions.”
Kyle Anderson is the Senior Editor for Nerdist. He hosts the weekly pop culture deep-dive podcast Laser Focus. You can find his film and TV reviews here. Follow him on Letterboxd.