Microsoft plans significant layoffs in its Xbox division as the company’s fiscal year concludes on June 30, with industry sources indicating that the cuts could surpass any previous workforce reduction in gaming history. George Broussard, co-founder of 3D Realms, noted that he has seen a list of impacted Xbox studios and described the potential scale of layoffs as unprecedented, warning that “the devastation is going to reverberate like the meteor that took out the dinosaurs.” He predicted Xbox would become “supremely unpopular for a very long time.”
Bloomberg’s Jason Schreier reported that these layoffs are sought by new Xbox CEO Asha Sharma, who stated the business is “not in a healthy spot” and has called for a “reset.” He specified that the layoffs will not commence until after the fiscal year ends, targeting late June or early July.
Several studios, including Compulsion Games, Double Fine Productions, and Ninja Theory, are reportedly negotiating to transition to independent status to avoid closure. Undead Labs, noted for developing State of Decay 3, is also at risk, according to reports from GamesBeat and corroborated by Windows Central. ZeniMax studios, which includes teams from Bethesda and Blizzard, have also been mentioned as potentially facing layoffs.
These workforce cuts are reportedly being driven by Microsoft CFO Amy Hood, who seeks to generate savings to offset losses in the gaming division, currently operating at about a 3% profit margin.
In addition to layoffs, Xbox has frozen negotiations for new third-party Game Pass deals, as indicated by Fernando Rizo from Caboodle Games during a podcast discussion. Several independent developers have confirmed this freeze is related to the fiscal year transition and the reset in strategy.
Jez Corden from Windows Central suggested the freeze is not a permanent measure, linking it directly to ongoing changes within the company. Microsoft has not publicly acknowledged any layoffs or alterations to Game Pass strategy.
If the layoffs exceed the 1,900 job cuts made in January 2024, they would mark the largest workforce reduction in the gaming industry’s history.
