Microsoft has officially confirmed that 268 positions have been eliminated as part of a broad re‑organisation of its internal development studios, a move that also includes the planned shutdown of Ninja Theory. According to a report from The Information, Xbox is gearing up for a second round of layoffs that is expected to take place later this week. A source familiar with the situation told the outlet that the company intends to "consolidate several of its game studios" as a continuation of the restructuring that began earlier this year.
The Video Game Chronicles (VGC) suggests that the consolidation could involve mergers or internal reshuffling across the various divisions that sit under the Xbox umbrella, including Xbox Game Studios, Bethesda, Activision, and Blizzard. The first wave of reductions was announced in July, when Xbox disclosed a plan to cut 3,200 jobs across its worldwide operations. That initial round resulted in roughly 1,600 redundancies, with notable layoffs at studios such as Obsidian Entertainment, Bethesda Game Studios, id Software, and Zenimax Online Studios. In addition to the workforce reductions, the platform holder also decided to divest five of its internal studios: Compulsion Games, Double Fine Productions, Ninja Theory, Undead Labs, and Arkane.
Two of those studios—Compulsion Games and Double Fine—were spun off and are now operating as independent entities. Ninja Theory and Undead Labs are in the process of being acquired by external partners, while Arkane Lyon entered a consultation phase to determine its future within the larger corporate structure.
Xbox chief executive Asha Sharma explained that the restructuring was driven by the realization that the company 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. The number one measure of your strategy is what you put your resources behind, and we simply spread ourselves too thin." In an internal memo addressed to staff, Sharma highlighted that the platform teams had expanded by 40% since the launch of the current console generation, even as the overall player base and total playtime were trending downward.
To address the inefficiencies created by rapid growth, she outlined a plan to trim the number of management layers to five, noting that some teams had as many as 14 hierarchical levels. "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." She concluded the memo with a forward‑looking statement: "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 restructuring comes at a time when Xbox is also navigating other high‑profile developments.
Earlier this month, the company announced that 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 partnership with Kojima Productions as "a big moment" for Xbox, underscoring the strategic importance of aligning with high‑caliber creators as the company refocuses its resources.
Industry analysts view the second wave of layoffs as a logical extension of the earlier cuts, suggesting that Xbox is aiming to streamline its portfolio, reduce overhead, and concentrate on projects that promise the strongest returns. By consolidating studios, the firm hopes to eliminate duplicated functions, foster tighter collaboration, and accelerate decision‑making processes that have become bogged down by excessive bureaucracy. The broader context includes the competitive pressure from rival platforms, shifting consumer habits toward subscription‑based gaming services, and the need to invest heavily in next‑generation technology such as cloud gaming and AI‑driven development tools. As part of its long‑term vision, Xbox appears to be positioning itself to deliver a more cohesive ecosystem that can support a billion‑plus daily audience, as Sharma articulated.
While the immediate impact on affected employees is undoubtedly challenging, the company has pledged to provide severance packages, outplacement assistance, and support for transition to new roles within the industry. The announced consolidations also signal that certain studios may see renewed investment and focus, potentially leading to revitalized franchises and fresh IPs that align with Xbox's refreshed strategic priorities.
In summary, the upcoming second round of layoffs reflects Xbox's ongoing effort to streamline its operations, reduce complexity, and re‑allocate resources toward core growth areas. By cutting down on managerial layers, merging overlapping studios, and forging strategic publishing partnerships, the platform aims to emerge more agile and better positioned to capture a larger share of the global gaming market in the years ahead.