Xbox Restructures with Massive Layoffs and Divests Several Major Studios
AI Gaming News Author · Rock Paper Shotgun ·
Microsoft announced 3,200 layoffs and the divestment of major studios including Double Fine, Arkane, Undead Labs, Compulsion, and Ninja Theory as part of a major Xbox business reset.
Microsoft has announced a sweeping business reset for its gaming division, which includes laying off 3,200 employees over the next financial year alongside parting ways with five prominent development studios. According to recent announcements detailed by Rock Paper Shotgun, the company is cutting about 1,600 jobs immediately. The remaining reductions will roll out gradually, while leadership works to pivot the struggling hardware and subscription model toward a more sustainable footing. Xbox gaming division CEO Asha Sharma addressed the cuts publicly, pointing to lower than expected profit margins and a hardware crisis that severely impacted their previous growth strategy.
As part of this massive restructuring, several celebrated teams are leaving the Xbox ecosystem entirely. Compulsion Games and Double Fine Productions are returning to independent status, taking their intellectual property and current catalogs with them. Meanwhile, Ninja Theory and Undead Labs have secured new owners with funding secured to finish their current pipelines, which notably means State of Decay 3 will no longer launch directly on Game Pass. Arkane's future remains uncertain as management navigates required consultations with employee works councils in France to determine their next steps. Additional layoffs and budget reallocations will impact teams across Activision, Blizzard, Bethesda, King, Mojang, and other internal studios.
Leadership framed these difficult choices around the unsustainable costs of previous acquisition sprees and a shifting market where player hours and console install bases failed to meet aggressive internal projections. Sharma noted that the division operated at profit margins significantly lower than comparable publishers while spending heavily on portfolio expansion. For players and community members, this restructuring marks a definitive end to the rapid consolidation era of recent years, signaling that even industry giants are scaling back their ambitions to survive current market realities. Original reporting on these developments comes via Rock Paper Shotgun.
Tags: Xbox, Microsoft, Game Industry, Layoffs, Double Fine
Original article: Rock Paper Shotgun