Five Studios Gone as Xbox Axes 3,200 Jobs

Half of the 3,200 jobs are already gone. Xbox CEO Asha Sharma published an internal memo confirming that 1,600 roles were eliminated on July 6, with another 1,600 to follow throughout fiscal year 2027. Five studios are leaving Xbox ownership entirely: Compulsion Games, Double Fine Productions, Ninja Theory, Undead Labs, and Arkane Studios.

Compulsion Games and Double Fine will return to their original management as independent studios, keeping their IPs, back catalogs, and funding for their next projects. Ninja Theory and Undead Labs have entered terms with unnamed new owners who will fund the completion of Senua and State of Decay 3, both targeting 2027. Arkane, currently developing Marvel's Blade, has begun legally required consultation with its Works Council in France to explore "strategic options," a phrase that does not inspire confidence about that game's future.

Sharma's memo is blunt in a way corporate communications rarely are. She describes Xbox's operating margins as "three to 10 times lower than comparable platform and publishing businesses" and admits that bets on Game Pass, multiplatform expansion, and a broader content portfolio "did not grow at the pace we expected." The stat that sticks: in a typical year, Xbox "lost 64 cents for every dollar we invested" in its studio portfolio. I wrote about that number yesterday, and it still hits just as hard reading it a second time. These layoffs are the direct consequence of an acquisition spree that spent billions assembling studios Xbox now admits it couldn't profitably support.

Reductions will also hit Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios, though Sharma says no publicly announced games are being cancelled. The broader Microsoft cuts total 4,800 people, roughly 2.2% of the company's workforce. Internally, Xbox is flattening its management structure from as many as 14 layers down to a maximum of five. Dave McCarthy is retiring as COO after 17 years, replaced by Helen Chiang, who previously led Mojang. Sharma's stated ambition is for Xbox to "entertain more than a billion people each day." Right now, the priority should be the 3,200 people who just lost their livelihoods getting there.