Xbox confirms 3,200 layoffs over the next year
Microsoft will cut 3,200 jobs across its Xbox division, with 1,600 immediately. Four studios are being transferred or spun off, and the company cites the need for a 'reset' due to unsustainable margins and a hardware crisis.
Layoff Scope and Reasons
Microsoft is continuing to shrink its gaming workforce. Xbox CEO Asha Sharma confirmed plans to let go of approximately 3,200 employees over the coming year across Activision, Bethesda/ZeniMax, Blizzard, King, Mojang and Xbox Game Studios. Half of these cuts, 1,600 jobs, will take place immediately. Sharma explained that the division is resetting its content portfolio after aggressively expanding since 2018, but now faces competition from smaller independent studios. In a typical year, Xbox lost 64 cents for every dollar invested.
Studio Changes
Four studios will continue under new ownership or independence. Compulsion Games (maker of South of Midnight) and Double Fine Productions will become independent, retaining their IP, catalog, and runway for future games. Ninja Theory and Undead Labs will join new ownership with funding to complete Senua and State of Decay 3. For Arkane Studios, management is beginning consultation with its Works Council to review strategic options.
Organizational Restructuring
To improve efficiency, Sharma is flattening the organization by removing layers of management. Mojang and King will now report directly to her. Platform teams are 40% larger than at the start of this console generation, even as player base and playtime have declined. Chief Operating Officer Dave McCarthy is retiring, and Helen Chiang, who led Minecraft for the last decade, will become the new COO with end-to-end profit and loss responsibility across content, hardware, platform, and services.
Financial Health
Sharma bluntly stated that the business is not healthy, with margins 3–10x lower than comparable platforms. The company entered the current generation with a smaller install base and higher cost structure, betting on Game Pass and multi-platform growth that did not materialize as expected. The industry now faces the most severe hardware crisis in its history. Xbox previously cut 1,600 jobs in early 2024 and hundreds more just over a year ago. The Communications Workers of America union urged Microsoft to negotiate in good faith over meaningful layoff protections.
