Xbox Cuts Around 3,200 Jobs and Lets Five Studios Go in Its Biggest Restructure Yet

Microsoft confirmed today that it is cutting around 4,800 jobs across the company, about 2% of its workforce, and the gaming division is taking the heaviest hit. Xbox will lose roughly 3,200 roles through fiscal 2027, about a fifth of the division, with around 1,600 of those going today. In her announcement, Xbox CEO Asha Sharma called it “the most significant restructure in Xbox history.”

Five studios are leaving the Xbox brand, though not all the same way. Compulsion Games, whose South of Midnight won a Peabody earlier this year, and Double Fine, the Psychonauts studio, both return to independence with their IP, catalog, and runway. Ninja Theory, the Hellblade studio, and Undead Labs, maker of State of Decay, have agreed to terms with new owners who will fund the completion of Senua and State of Decay 3. Arkane, the Dishonored studio and the developer behind the still-unfinished Marvel’s Blade, has begun a required consultation with its Works Council over its future.

Sharma was unusually direct about why. “Our business today is not healthy,” she wrote. “We are operating at margins that are 3-10x lower than comparable platform and publishing businesses.” She said Game Pass had “created meaningful value” but “did not grow at the pace we expected,” and promised a return to growth in 2027. She also stated that none of Xbox’s first-party publicly announced games or projects are being cancelled as part of the cuts, which, if it holds, means Marvel’s Blade is not among the casualties despite reports last week that it was on the block.

The damage reaches past the studios that left. The Elder Scrolls Online team at ZeniMax Online was reportedly cut by around half. A week earlier, the Communications Workers of America, which represents more than 3,500 Microsoft gaming staff, held a press conference demanding layoff protections that several studios had been waiting months for Microsoft to negotiate. Microsoft rejected the union’s proposal before the cuts began, while saying it is continuing to bargain in good faith.

Here is the shape of the day, and it is worth sitting with. Microsoft went out of its way to say the games are safe: the sequels funded, the catalogs handed back, the announced projects intact. What it cut was people, about 3,200 of them. The work survives. A lot of the workers do not. There is more to say about what that means, and I will say it, but for the record: this is the day Xbox stopped being the company that bought studios and became the one that sells them.