Microsoft has officially confirmed that 268 positions have been eliminated as part of a broad re‑organization of its internal development studios, a move that also includes the planned shutdown of Ninja Theory. According to a recent report from The Information, Xbox is gearing up for a second round of workforce reductions this week.
A source close to 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 restructuring could manifest as mergers, internal realignments, or other forms of integration across Xbox Game Studios, Bethesda, Activision, and Blizzard, as suggested by industry tracker VGC. The first wave of cuts was announced in July, when Xbox disclosed a plan to lay off roughly 3,200 employees. That initial round resulted in about 1,600 redundancies, hitting major studios such as Obsidian, Bethesda, Id Software, and Zenimax Online Studios.
In addition to job losses, 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 out 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, while intended to expand the business, inadvertently diverted attention from its core operations. "The number‑one measure of your strategy is what you put your resources behind, and we simply spread ourselves too thin," Sharma said in a staff memo. Sharma's memo also 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 the inefficiencies created by that rapid expansion, she announced a plan to trim the number of management layers to five, noting that some groups had as many as 14 layers of oversight.
"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 trade‑offs, and get things done." The executive concluded with an optimistic outlook, emphasizing that the changes are meant to secure a larger, not smaller, future for Xbox. "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 added confidence that the brand would return to a growth trajectory by 2027, pointing to Xbox's long‑standing reputation as a beloved entertainment franchise supported by talented studios worldwide. In related 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 that it would step away from the project in mid‑June.
Sharma described the new partnership with Kojima Productions as "a big moment" for Xbox, underscoring the company's commitment to securing high‑profile, creator‑driven experiences despite the ongoing internal shake‑up. The broader context of these layoffs reflects the gaming industry's current climate, where rapid technological change, shifting consumer habits, and intense competition force even the largest players to continually reassess their structures. For Xbox, the consolidation of studios could mean tighter collaboration, shared technology pipelines, and a more focused portfolio of titles that align with the company's long‑term vision.
While the immediate impact on employees is undeniably painful, the leadership hopes that a leaner, more cohesive organization will enable faster decision‑making, better resource allocation, and ultimately, a stronger lineup of games for its audience. Analysts note that such restructuring is not unique to Microsoft; other major publishers have also undertaken similar moves to streamline operations and reduce overhead.
The key question for Xbox will be how effectively it can integrate the remaining studios, preserve creative autonomy where it matters, and maintain morale among the workforce that remains. If successful, the consolidation could position Xbox to compete more aggressively with rivals, expand its subscription services, and deliver innovative experiences that keep players engaged in an increasingly crowded market.
In summary, Xbox is poised to initiate a second wave of layoffs this week, aiming to merge or realign several of its development studios as part of a broader effort to cut excess layers, refocus on core products, and set the stage for growth by 2027. The company acknowledges the difficulty of these decisions but frames them as essential steps toward a more sustainable, future‑oriented operation that can continue to entertain billions worldwide.