Microsoft confirmed that its Xbox division will undergo the largest restructuring in the brand’s history, with a plan to eliminate up to 3,200 jobs over fiscal 2027 and to sell, spin off or possibly divest several development studios, CEO Asha Sharma told employees.
Immediate and phased layoffs
Sharma said roughly 1,600 employees will be laid off immediately, with additional reductions phased in over the coming months. The changes are intended to make Xbox a leaner operation after years of rapid expansion driven by major acquisitions such as Bethesda and Activision Blizzard.
Four studios to leave Xbox
As part of the reorganization, four studios will depart Xbox’s corporate structure. Compulsion Games and Double Fine Productions will return to independent operation while retaining their intellectual property and autonomy to pursue new projects. Ninja Theory and Undead Labs are currently in negotiations for acquisition by new investors.
The future of French studio Arkane remains undecided; the internal memo indicates Arkane’s leadership has begun consultations with its works council to assess strategic alternatives, which could include a sale or other restructuring options.
Sharma emphasized that no previously announced first-party game will be canceled as a result of the restructuring.
Streamlining management and cutting costs
According to the CEO’s message, Xbox needs a “reset.” She noted that the division operates with profit margins well below many peers and has become overly complex after years of growth. Some areas currently have up to 14 management levels; the plan reduces that to a maximum of five levels and, in some teams, as few as three.
Xbox also intends to lower supplier spending, simplify internal processes and realign teams around prioritized projects.
Priority shifts to Minecraft and The Elder Scrolls
While total content investment will remain at record levels in the next fiscal year, funding will be redistributed. Sources cited by Variety indicate that franchises such as Minecraft and The Elder Scrolls will receive strategic priority within Microsoft.
Studios Mojang and King, which oversee Minecraft and Candy Crush respectively, will report directly to the Xbox CEO, reflecting their role in the division’s growth plans.
Leadership message and goals
In closing the internal memo, Sharma acknowledged the difficulty the process presents for employees but said the steps are necessary to ensure the brand’s long-term sustainability. She stated the objective of transforming Xbox into a platform capable of reaching more than one billion people daily and expressed the expectation of returning the division to a growth trajectory by 2027.
