Xbox announces plans to lay off 3,200 staff and divest five studios

Xbox is in the middle of a major reset: 3,200 staff are being laid off, roughly one-fifth of the Xbox organization, with 1,600 roles eliminated immediately. The cuts are part of a broader Microsoft reduction of 4,800 people, and they land across Xbox Game Studios, Bethesda/ZeniMax, Blizzard, King, Mojang, and Activision.

Five studios are being divested or restructured. Compulsion Games and Double Fine are being spun out as independent studios with their IP, catalog, and runway for future projects. Ninja Theory and Undead Labs have entered terms for new ownership and funding to keep Senua and State of Decay 3 moving, while Arkane has started consultation proceedings in France to review strategic options under local labor law.

For developers, the practical takeaway is that Xbox is narrowing its portfolio and flattening its org chart at the same time. Helen Chiang is now Xbox COO with end-to-end P&L responsibility across content, hardware, platform, and services, while Mojang and King now report directly to CEO Asha Sharma. Microsoft is also cutting management layers from as many as 14 down to five, trimming external vendor spend, and streamlining shared services and codebases.

Sharma framed the move as a response to a more crowded market and said Xbox is not the right home for every studio. No publicly announced first-party games are being cancelled, but the layoffs and studio changes will ripple through production schedules, staffing plans, and partner confidence across the platform.