Xbox Cuts 3,200 Jobs, Parts Ways With 4 Studios in Historic Restructure

It’s been a tough week for the gaming industry. PlayStation has ended support for physical media, next-generation consoles are brushing up against the $1,000, and just when you thought it couldn’t get any worse, Xbox has some of its own disappointing news. Microsoft has confirmed plans to cut 3,200 jobs across Xbox while also ending ties with four major game studios under its belt. The move has been described as the most “significant restructuring” in Xbox’s history, as the company looks forward to securing the brand’s future.

Microsoft’s Xbox Reset Begins with 3,200 Job Cuts

In a statement published on Xbox Wire, CEO Asha Sharma has announced that after a careful review of the business, the company has decided to reduce its workforce by 3,200 employees over the course of the fiscal year 2027. The restructuring begins today, with 1,600 roles being eliminated. Not only that, but Ninja Theory, Undead Labs, Compulsion Games, and Double Fine Productions will also be spun off or sold.

Sharma acknowledges that it’s a painful decision, but it’s necessary because Xbox isn’t operating as a “healthy” business. According to her, the brand’s profit margins are significantly lower compared to competing gaming platforms and publishing businesses. Although Xbox’s strategy of investing in Game Pass and expanding its content portfolio has created value for players, the business hasn’t grown at the pace that was anticipated. Xbox’s core business also weakened, and despite an increased investment for better results, things haven’t worked out.

She further reveals that the company has lost 64 cents for every dollar invested. While confirming the future of the four studios, their catalog, and upcoming projects, Sharma also stated that resources will now be directed towards the higher-priority projects within Xbox. It’s also been stated that Arkane Studios is exploring potential strategic options as part of the restructuring. She’s confirmed that no first-party games are being canceled due to these restructurings. However, the layoffs will affect major studios under Xbox’s portfolio, including Bethesda, ZeniMax, Activision, Mojang, Blizzard, King, and others.

Xbox will also simplify its organizational structure to speed up decision-making and eliminate the issue of fragmented teams. Sharma reveals that there are plans to reduce management layers and create a developer-focused environment. The company is also introducing a new Chief Operating Officer role with end-to-end oversight of hardware, platform, content, and services. With these changes, Sharma expects the company to build a stronger and more sustainable business model.

Not Even Xbox Consoles Have Escaped Microsoft’s Wrath

Xbox consoles have gotten more expensive as well. | Credits: Microsoft

There’s no denying that Microsoft’s latest restructuring is a devastating blow for the developers affected. Unfortunately, it’s not the only piece of bad news for the brand.

Just a few days earlier, Xbox announced another round of price increases in 2026 for its Series S/X consoles, effective August 1, 2026. The 512 GB models will cost $100 more, and the 1 TB variants are set to rise by $150. The company has also confirmed that the 2 TB model will be discontinued.

The announcement follows a previous price hike in October 2025. The company had hoped it wouldn’t have to raise prices again for consoles despite the ongoing component shortage, but the rising costs have forced the company to make the hard decision yet again. Not only that, but there was also a price hike for Game Pass in the US in 2025.

With that said, what do you think about Microsoft’s latest restructuring? Let us know in the comments below!