Xbox is shrinking. Fast. Microsoft announced plans to cut 3,200 jobs from its gaming division and spin off five studios. Half the layoffs take effect immediately. The rest by the end of Microsoft’s 2027 fiscal year. That’s roughly 20% of the Xbox division gone.
New Xbox CEO Asha Sharma laid out the brutal math. The division has gotten bloated — decisions sometimes pass through 14 layers of management. Her plan? Flatten it to no more than five layers, ideally three.
The studio firesale is just as dramatic. Compulsion Games and Double Fine will operate independently with their own IP. Ninja Theory and Undead Labs have been bought by other companies. Arkane Studios is exploring options outside Xbox. Sharma admitted the acquisitions were a financial mistake — losing 64 cents for every dollar invested in a typical year.
Combined with 1,600 other Microsoft layoffs across the company, that’s about 2% of Microsoft’s total workforce. But the Seattle Times notes headcount has stayed relatively stable thanks to other hiring.
Sharma says no announced games are being canceled. But when you’re cutting 3,200 people and shedding studios you spent years acquiring, “reset” is the right word. It’s going to be a different Xbox on the other side.
