Microsoft plans to cut approximately 3,200 jobs from its Xbox division over the next year as part of a restructuring initiative aimed at enhancing profit margins and operational efficiency. Of these cuts, 1,600 positions will be eliminated immediately, affecting studios such as Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios.
These layoffs are part of a broader reduction at Microsoft, which is cutting 4,800 positions, representing about 2.1% of its global workforce. According to reports, 350 affected employees from four studios that Xbox is divesting will transition to new ownership. The developers at Compulsion Games and Double Fine Productions will operate independently, retaining their intellectual properties and resources for future game projects.
Microsoft’s Xbox CEO Asha Sharma stated that Ninja Theory and Undead Labs have reached terms to join new ownership, with funding earmarked for the continued development of their respective titles, Senua and State of Decay 3. The future of Arkane Studios remains uncertain, with management consulting its Works Council regarding potential strategic options. Rumors suggest delay for Arkane’s upcoming Blade game, which is now targeting a late 2027 release.
Sharma indicated that these changes are necessary for resetting Xbox’s content portfolio, amidst increased competition and losses in investment returns. “Since 2018, we have aggressively expanded our studio portfolio while the number of games created each month across the industry now outpaces the last ten years combined,” Sharma noted. She emphasized that Xbox’s operation margins are significantly lower than those of comparable businesses, necessitating a reset.
Despite these layoffs, Sharma assured that no first-party games or announced projects will be canceled. However, there will be a shift in investment focus towards higher-priority projects. The restructuring includes Mojang and King reporting directly to Sharma, aiming to streamline the organization by reducing management layers.
As part of the leadership changes, Xbox’s COO Dave McCarthy is retiring, with Helen Chiang appointed as the new COO, tasked with unifying business operations. This overhaul aims to enhance decision-making and accountability across the division. Sharma described the current state of the business as unhealthy, citing margins that are significantly lower than industry standards.
Plans for the layoffs were communicated in a memo that outlined the need for a division reset. The heads of several studios had been negotiating independence as they faced potential shutdown. The Communications Workers of America, representing many affected workers, urged Microsoft to negotiate meaningful layoff protections.
These layoffs come shortly after Microsoft announced increased prices for Xbox consoles amid rising costs for memory and storage. The company had previously cut 1,600 jobs in early 2024 and conducted additional rounds of layoffs the previous year.
