Microsoft’s Xbox division may carry out a new round of layoffs as soon as this week, potentially impacting hundreds of employees and triggering consolidation among some of its game studios.
Report points to second major reduction in 2026
The report, originally published by The Information and later cited by VGC, says the planned cuts would represent a second large staff reduction for Xbox in 2026. A source familiar with the company’s plans told the outlets that the move could affect publishing structures across Xbox Game Studios, Bethesda and Activision Blizzard.
Microsoft has not confirmed which teams would be directly affected or how many positions would be eliminated in this potential round.
Restructuring driven by CEO Asha Sharma
The new layoffs would continue a broader restructuring led by Xbox CEO Asha Sharma, who has previously said she intended to “reset” operations that were not in a healthy position.
In July, Microsoft began a wave of cuts that initially impacted about 1,600 employees, with another 1,600 roles expected to be removed by the end of the company’s fiscal year. That reorganization also changed studio arrangements: Compulsion Games and Double Fine Productions returned to independent operation, while Ninja Theory and Undead Labs entered talks to move to new owners.
Other teams saw significant reductions: ZeniMax Online Studios lost hundreds of staff, and id Software eliminated around 100 positions.
Layoff trend within Xbox dates back years
This possible new round would extend a sequence of cuts affecting Microsoft’s gaming division over several years. In 2024, the company announced the dismissal of 1,900 employees across Xbox, Bethesda and Activision Blizzard. In 2025, broader reductions across Microsoft—about 9,000 roles—also impacted the gaming arm.
The period included cancellations of projects such as the reboot of Perfect Dark and Rare’s Everwild.
Beyond job cuts, the reported plan to consolidate studios suggests Microsoft may continue to shrink and reorganize the group it built following years of major acquisitions in the industry.
Company statement and next steps
As of now, Microsoft has not publicly confirmed which studios would be consolidated or how many employees would be affected by the potential new layoffs.
