The layoff hammer has finally fallen at Xbox, with CEO Asha Sharma herself announcing that the division will lose 3,200 employees through job cuts and four studio divestitures (plus a wildcard).
The wildcard is Arkane Lyon, which the executive says has already begun the obligatory consultation with its Works Council to" review potential strategic options". This suggests every option is still on the table for the studio that made Dishonored and Deathloop: closure, going independent, or finding a buyer.
The known quantities are Compulsion Games (Contrast, We Happy Few, South of Midnight) and Double Fine Productions (Psychonauts, Brutal Legend, Broken Age, Keeper, and Kiln), which are going back to independence with their own management taking over from Microsoft. On the other hand, Ninja Theory and Undead Labs are being sold to an as-yet-unidentified party and reportedly have secured funding to complete and even "grow" Senua and State of Decay 3, both of which were announced for a 2027 launch at the Xbox Games Showcase last month.
The rest of the studios are being kept, and Sharma also stressed that none of the first-party announced Xbox projects are being canceled (though the third-party partnership with IO Interactive on Project Fantasy has just ended). However, substantial layoffs are also taking place across Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and XBOX Game Studios.
In the executive's own words, this strategic decision is a reset toward a smaller, more centralized, more profitable Xbox, built around fewer bets, tighter execution, and more direct control over the biggest parts of the business. Sharma says Xbox grew into a fragmented organization with too many independent teams, studios, and functions, making it harder to align on shared goals and make trade-offs quickly. Her answer to that is to reduce that complexity by cutting layers of management, consolidating decision-making, and moving more responsibility directly under Xbox leadership. For example, Mojang and King will now report directly to Sharma.
Ultimately, the executive told staff and community alike that her goal is for these hard decisions to eventually build a bigger, better future for the division, not a smaller one. The jury's definitely still out on that, but at least gamers can rest a little easier knowing that none of the studios are being closed outright, for now.
About the author: With over two decades of experience in gaming journalism, Alessio Palumbo has led the gaming vertical at Wccftech since August 2015. He started working at a young age for Italian websites like Everyeye.it, Gamestar.it, Nextgame.it, and Multiplayer.it before kickstarting the indie English-language publication Worlds Factory as its founder and Editor in Chief. In the last decade, he has coordinated the overall output of Wccftech's gaming section, managed PR relations, assigned reviews, produced daily news coverage, edited gaming content as needed, and delivered game reviews. Arguably, his trademark content is the long series of exclusive developer interviews that have been cited by Wikipedia and by the biggest news media and gaming publications. His passion for technology also makes him knowledgeable when it comes to gaming hardware and tech. His favorite genres include RPGs, MMORPGs, and action/adventure games.
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