Xbox layoff plans reportedly include closing Arkane, canceling Blade

Microsoft is preparing for sweeping layoffs in its Xbox division, set to begin next week on July 6. According to a report by Tom Warren at The Verge, the company is considering closing Arkane Studios and canceling the Marvel's Blade game it has been working on since late 2023.

Combined with previous reports from Bloomberg and GamesBeat, it appears Microsoft plans to close or sell five studios: Compulsion Games, Double Fine, Ninja Theory, Undead Labs, and Arkane. There has been no update on Marvel's Blade for over two years, and The Verge reports the game is over budget and facing delays.

Xbox is exploring options to sell Arkane, similar to its reported approach with other studios. The entire Xbox division is bracing for layoffs following a memo from new CEO Asha Sharma and Chief Content Officer Matt Booty warning that the company is "over-extended" and that this cannot continue.

Xbox union members represented by the CWA have expressed disappointment and frustration with Microsoft leadership, calling for good-faith negotiations and transparency.

Arkane Studios, better known as Arkane Lyon, created the Dishonored series and Deathloop. Its sister studio, Arkane Austin, was shut down during a wave of layoffs in 2024. At that time, Arkane Lyon co-creative director Dinga Bakaba shared a message: "This is absolutely terrible."

The video game market lost an estimated 14,600 employees to layoffs in 2024, following 10,500 in 2023. Microsoft completed its $69 billion acquisition of Activision Blizzard in 2023, after the $7.5 billion ZeniMax acquisition in 2021.

In January 2024, Microsoft cut 1,900 jobs across Xbox, Activision, Blizzard, and ZeniMax. Later in 2024, it shut down Arkane Austin and Alpha Dog Games, sold Tango Gameworks, and laid off 650 more employees. In summer 2025, Microsoft laid off 9,000 employees across the broader company.

The upcoming 2026 Xbox layoffs have already affected IO Interactive (Hitman, 007 First Light), which lost an external partner (Xbox) and reduced staffing. However, Kojima Productions' game OD, published by Xbox, will not be affected.