Microsoft has officially confirmed that 268 positions have been eliminated as part of a broad re‑organisation that touches many of its internal development teams, including the anticipated shutdown of Ninja Theory. According to a recent report from The Information, Xbox is gearing up for a second round of layoffs that could be announced later this week.
A source close to the matter told the outlet that the company intends to "consolidate several of its game studios" as a core element of the continuing restructuring plan. Industry analysts at Video Game Chronicles (VGC) suggest that this consolidation could take the form of studio mergers, internal realignments, or other structural changes affecting Xbox Game Studios, Bethesda, Activision, and Blizzard.
The background to this latest move dates back to July, when Xbox first disclosed a massive workforce reduction target of 3,200 employees. The initial wave resulted in roughly 1,600 redundancies, hitting major studios such as Obsidian, Bethesda, Id Software, and Zenimax Online Studios. In parallel, the platform holder has been divesting a number of its internal development houses: Compulsion Games, Double Fine Productions, Ninja Theory, Undead Labs, and Arkane. Of those, Compulsion Games and Double Fine have been spun off as independent entities, while Ninja Theory and Undead Labs are in the process of being acquired by external partners.
Arkane Lyon, meanwhile, entered a consultation phase to determine its future. Xbox chief executive Asha Sharma explained that the restructuring was driven by the company's realization that it had "simply spread itself too thin." She said, "In order to grow, we made a bunch of bets. As we did that, we inherently didn't focus on the core business." Sharma emphasized that a company's strategic success is measured by where it allocates its resources, and that the over‑extension had diluted Xbox's focus.
In an internal memo, Sharma highlighted that platform‑related teams had expanded by 40 % since the launch of the current console generation, even as the player base and total playtime were trending downward. To address this mismatch, she outlined a plan to trim management layers to a maximum of five levels, noting that some divisions had ballooned to as many as fourteen layers of oversight. "As Xbox grew our headcount, we became more fragmented," Sharma wrote.
"Teams, studios, and functions often operate independently, and it became harder to work towards a shared goal, make the right trade‑offs, and get things done." Sharma concluded her message with an optimistic vision for the future: "These changes are about a bigger future at Xbox, not a smaller one. 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. I know we can achieve this goal. Xbox has been one of the most beloved franchises in entertainment history, with talented studios around the world, and we will return to growth in 2027." The memo also touched on recent partnership news.
Earlier this month, Xbox announced it would take on publishing duties for Kojima Productions' upcoming title *Physint* after the developer received an unexpected notice from Sony in mid‑June that it would step away from the project. Sharma described the new alliance between Kojima Productions and Xbox as "a big moment" for the platform, underscoring the strategic importance of high‑profile collaborations in the company's renewed focus on core experiences. The upcoming layoffs, if confirmed, are expected to affect a mix of development and support staff across the organization. While the exact numbers have not been disclosed, industry observers anticipate that the second wave could bring the total job cuts closer to the original 3,200‑person target set earlier in the year.
The consolidation effort may see certain studios merged under a single leadership structure, shared technology pipelines, or even the shuttering of underperforming projects. Analysts point out that the gaming sector as a whole is undergoing a period of rapid change, with rising development costs, shifting consumer preferences toward live‑service models, and increasing competition from cloud‑gaming providers. In this environment, large publishers like Microsoft are under pressure to streamline operations, eliminate redundancies, and invest more heavily in flagship franchises that can deliver sustainable revenue. From a broader perspective, the restructuring reflects Microsoft's strategic pivot toward a more focused, integrated ecosystem.
By trimming excess layers and concentrating resources on a smaller set of high‑impact studios, the company hopes to accelerate innovation, improve time‑to‑market for new titles, and enhance the overall player experience across Xbox consoles, Windows PCs, and cloud platforms such as Xbox Cloud Gaming. Employees impacted by the layoffs will receive severance packages and outplacement support, according to statements from the HR department. The company also pledged to maintain open communication channels throughout the transition, encouraging affected staff to explore internal mobility opportunities where possible. In summary, Xbox is poised to announce a second round of workforce reductions this week, part of a larger consolidation strategy aimed at simplifying its studio portfolio and refocusing on core business objectives.
While the cuts are undoubtedly difficult for those directly involved, the leadership believes that a leaner, more cohesive organization will better position Xbox to capture a larger share of the gaming market and achieve its ambitious growth targets by 2027.