Microsoft plans to initiate significant layoffs within its Xbox division on July 6, which may involve shutting down Arkane Studios and canceling the development of the Blade game, according to a report by Tom Warren at The Verge. Additional sources indicate that Microsoft is considering closing or selling five studios, including Compulsion Games, Double Fine, Ninja Theory, and Undead Labs.
Marvel’s Blade has not received an update in over two years and is reportedly over budget and facing delays. Microsoft is reportedly exploring options to sell Arkane Studios, similar to its reported strategies with the aforementioned studios.
The Xbox division’s impending layoffs follow a memo from new CEO Asha Sharma and Chief Content Officer Matt Booty, which stated, “We have found ourselves over-extended…. Going forward, this cannot continue.” Members of the Xbox union, represented by the Communication Workers of America (CWA), have expressed disappointment with Microsoft leadership and called for transparent and good-faith negotiations.
Arkane Studios, also known for creating the Dishonored series and Deathloop, previously experienced layoffs when Arkane Austin was shut down in 2024. Dinga Bakaba, co-creative director at Arkane Lyon, criticized corporate practices and emphasized the need for support for artists in the industry. “This is absolutely terrible,” Bakaba stated. “Don’t throw us into gold fever gambits, don’t use us as strawmen for miscalculations/blind spots.”
The video game industry has seen substantial layoffs, with approximately 14,600 employees losing their jobs in 2024, following about 10,500 the year before. Microsoft’s acquisition of Activision Blizzard King, valued at $69 billion, was finalized in 2023, following the $7.5 billion acquisition of ZeniMax, which includes Arkane Studios, in 2021.
Earlier in January 2024, Microsoft cut 1,900 jobs across various divisions, impacting Xbox and ZeniMax. The company went on to shut down other studios, including Arkane Austin and Alpha Dog Games, and also sold Tango Gameworks, resulting in 650 additional layoffs during that year. In summer 2025, Microsoft laid off 9,000 employees across the company, which included further job cuts within the Xbox division.
Reports suggest that IO Interactive, the developer of Hitman and 007 First Light, faced staffing reductions reportedly linked to the end of a partnership with an external developer, which may connect to upcoming layoffs in 2026. Meanwhile, Kojima Productions’ game OD, which is published by Xbox, will not be impacted by the layoffs.
