Microsoft cuts Xbox jobs and moves four studios out of the company
The Xbox restructuring includes about 1,600 immediate job cuts and plans to reduce the division further through fiscal 2027.
By Maya Lindqvist · Senior Technology Correspondent
3 min read
Microsoft is moving four Xbox game studios out of the company while cutting about 1,600 Xbox jobs now, according to The Verge and an internal memo from Xbox CEO Asha Sharma. The move pares back years of studio expansion and signals a tighter focus on larger franchises and higher-priority projects.
The Verge reported that Microsoft is laying off 4,800 employees companywide, with more than 30 percent of the cuts landing in the Xbox division. Sharma’s memo said Xbox plans to reduce its team by about 3,200 roles across fiscal 2027, including the cuts taking place now.
Double Fine Productions and Compulsion Games will return to independent ownership under their founders, according to Sharma’s memo. Tim Schafer will take Double Fine back outside Microsoft, while Guillaume Provost will do the same with Compulsion Games, The Verge reported.
Ninja Theory, known for Hellblade, and Undead Labs, the studio behind State of Decay, are also set to leave Microsoft under new ownership, according to the memo. Sharma said agreements are in place to support continued work on Senua and State of Decay 3.
Sharma told employees the restructuring cannot be completed in one day and acknowledged the effect on staff who helped build Xbox. She said the decisions do not reflect the ability or commitment of affected employees, according to the memo reported by The Verge.
Arkane faces a separate review
Microsoft is also considering options for another Xbox studio, The Verge reported. Arkane Studios, which is working on Blade under Xbox management, has seen the project delayed and running over budget, according to The Verge.
Sharma said Arkane’s management in France is starting required talks with its Works Council to review possible strategic options. The Verge reported that those discussions may take months, leaving the future of Arkane and Blade unresolved.
Broader changes across Xbox
The cuts will reach other parts of Microsoft’s gaming business, including Activision, Bethesda/ZeniMax, Blizzard, King, Mojang and Xbox Game Studios, according to Sharma. The Verge reported that Bethesda studios are expected to see larger reductions.
Sharma said no publicly announced first-party games or projects are being canceled as part of the reductions. Mojang, maker of Minecraft, and King, developer of Candy Crush, will now report directly to Sharma, according to the memo.
In the memo, Sharma said Xbox’s business is operating at margins far below comparable platform and publishing companies. She also said Game Pass, multi-platform releases and a broader content portfolio created value but did not grow as quickly as Microsoft expected.
Sharma wrote that Xbox had learned it was not the right owner for every type of studio and said that, in a typical year, Microsoft lost 64 cents for every dollar it invested in that part of the business. She said Xbox will still support independent creators through development tools and access to audiences.
The memo also outlined management changes. Sharma said Xbox will reduce layers of management, cut vendor spending and create a chief operating officer role with profit-and-loss responsibility across content, hardware, platform and services. Helen Chiang has been promoted to that position and will report to Sharma, while Dave McCarthy is retiring after 17 years with Xbox, according to the memo.
This story draws on original reporting from The Verge.