Microsoft has officially confirmed that 268 positions have been eliminated as part of a broad reorganization affecting its internal development studios, including plans to shut down Ninja Theory. According to a recent report from The Information, Xbox is gearing up for a second round of layoffs that is slated to occur later this week. An insider familiar with the situation told the outlet that the company intends to "consolidate several of its game studios" as a key element of its continuing restructuring strategy. The speculation is that this consolidation could take the form of studio mergers, internal realignments, or the transfer of resources among the various entities that sit under the Xbox Game Studios umbrella, as well as its subsidiaries Bethesda, Activision and Blizzard, according to coverage from VGC.
The background to this latest move dates back to July, when Xbox first announced a massive workforce reduction of roughly 3,200 employees. That initial wave resulted in about 1,600 redundancies, hitting major studios such as Obsidian, Bethesda, Id Software and Zenimax Online Studios hard. In addition to the layoffs, the platform holder also divested five of its internal studios: Compulsion Games, Double Fine Productions, Ninja Theory, Undead Labs and Arkane.
While Compulsion Games and Double Fine have been spun off as independent entities, Ninja Theory and Undead Labs are in the process of being acquired by external partners, and Arkane Lyon entered a consultation phase to determine its future. Xbox chief executive Asha Sharma explained that the restructuring was necessary because the company had "simply spread itself too thin." She said that in the pursuit of growth, Xbox made a series of ambitious bets that inadvertently diverted attention away from its core business.
"The number one measure of your strategy is what you put your resources behind, and we simply spread ourselves too thin," Sharma remarked. In a memo circulated to staff, she highlighted that platform teams had swelled by 40 percent since the launch of the current hardware generation, even as the player base and total playtime were on a downward trend.
To address the inefficiencies created by this rapid expansion, Sharma outlined a plan to trim the management hierarchy to no more than five layers. Some teams, she noted, had as many as 14 layers of management, which hampered decision‑making and slowed execution.
"As Xbox grew our headcount, we became more fragmented," she wrote. "Teams, studios, and functions often operate independently, and it became harder to work towards a shared goal, make the right tradeoffs, and get things done." The CEO emphasized that the upcoming changes are intended to secure a larger, more sustainable future for Xbox rather than to shrink the business.
"I want Xbox to be one of the few companies that entertains more than a billion people each day and gives everyone the opportunity to create and connect," Sharma said. She expressed confidence that the company could achieve this ambition, citing Xbox's status as one of the most beloved entertainment franchises in history and its network of talented studios around the globe. "We will return to growth in 2027," she concluded. In parallel with these internal shifts, Xbox made headlines earlier this month by announcing it would publish Kojima Productions' forthcoming title "Physint" after the developer received an unexpected notice from Sony in mid‑June, indicating that Sony would step away from the project.
Sharma described the new partnership with Kojima Productions as "a big moment" for Xbox, underscoring the company's willingness to seize high‑profile opportunities even as it streamlines its operations. The second round of layoffs, if it proceeds as reported, is expected to affect additional studios and could involve further consolidation of resources across the Xbox ecosystem. Analysts suggest that the move may be aimed at sharpening the focus on flagship franchises, improving cross‑studio collaboration, and ensuring that development pipelines are more efficient and cost‑effective. By reducing redundancies and aligning studio priorities, Xbox hopes to better position itself against competitors and to accelerate the delivery of new content to its growing subscriber base.
While the exact numbers and the specific studios that will be impacted have not been disclosed, the broader narrative points to a strategic recalibration. Xbox is attempting to balance the need for innovation—evident in its recent collaborations and acquisitions—with the financial discipline required to sustain long‑term growth.
The company's leadership appears committed to preserving its creative talent pool while eliminating structural bloat that has hampered productivity. In summary, the upcoming layoff round reflects Xbox's ongoing effort to streamline its operations, consolidate its studio portfolio, and refocus on core strengths. The company aims to emerge leaner, more agile, and better equipped to deliver compelling experiences to a global audience, with a clear eye toward a resurgence in growth by 2027.