Key facts
- Xbox is laying off 3,200 employees, affecting about 20% of its gaming division.
- Five studios acquired by Xbox are being divested or will operate independently.
- The company aims to simplify its organizational structure and reduce management layers.
- Investment will be refocused on major franchises like Call of Duty, Fallout, and Halo.
- The divestments are a reversal of a studio acquisition strategy that began in 2018.
- The company stated that no first-party announced games are being canceled as part of these reductions.
Microsoft's Xbox division is undergoing a significant restructuring, including the layoff of 3,200 employees and the divestment of five studios. New Xbox CEO Asha Sharma announced the changes, stating that the move is necessary to simplify the division, which has become bloated with management layers and has seen declining player engagement despite growth in its platform team.
The layoffs, which affect approximately 20% of the Xbox division, are part of a broader effort to refocus on the company's most profitable and industry-defining franchises. Sharma indicated that while no first-party announced games are being canceled, the company is reversing a years-long strategy of acquiring smaller studios. Compulsion Games and Double Fine Productions will regain full control of their intellectual property and operate independently. Ninja Theory and Undead Labs have been sold to other companies, while Arkane Studios is exploring options to operate outside of Xbox.
Sharma acknowledged that these studio acquisitions have been financially detrimental, resulting in significant losses. In contrast, major studios like Mojang and King, which contribute substantially to Microsoft's monthly player base, will now report directly to her. The company plans to shift investment towards higher-priority projects and its core gaming franchises, a move that may impact the availability of more experimental titles on Xbox Game Pass.
These changes follow previous rounds of layoffs within Microsoft's gaming division, including those after the Activision Blizzard acquisition and in mid-2024. The company's overall headcount has remained stable due to hiring in other areas, but the Xbox restructuring signals a new era focused on profitability and core intellectual property.