Microsoft has officially confirmed that 268 positions have been eliminated as part of a broad overhaul of its internal development teams, 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 could be announced 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 continuation of the restructuring that began earlier this year.
The speculation, echoed by VGC, suggests that the consolidation could take the form of mergers or internal realignments across Xbox Game Studios, Bethesda, Activision, and Blizzard. The first wave of reductions was announced in July, when Xbox disclosed a plan to cut roughly 3,200 jobs. 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 the layoffs, Microsoft has divested five of its internal studios: Compulsion Games, Double Fine Productions, Ninja Theory, Undead Labs, and Arkane.
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 necessary because the company had "simply spread itself too thin." She said that in pursuit of growth, Xbox made a series of strategic 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 said in a staff memo.
Sharma's memo also highlighted that the platform's internal teams had expanded by 40% since the launch of the current console generation, even as the player base and total playtime were on a downward trend. To address the inefficiencies that arose from this rapid expansion, she outlined a plan to trim the number of management layers to five, noting that some divisions had as many as 14 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 tradeoffs, 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." Sharma expressed confidence that the company could achieve this ambition, pointing to Xbox's long‑standing reputation as one of the most beloved entertainment franchises worldwide. "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," she said.
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 in mid‑June, prompting the partnership to shift. Sharma described the new collaboration with Kojima Productions as "a big moment" for Xbox, underscoring the company's intent to strengthen its portfolio with high‑profile, creator‑driven projects.
The broader context of these moves reflects a gaming industry that is increasingly competitive and capital‑intensive. As subscription services, cloud gaming, and cross‑platform play become more prevalent, major publishers like Microsoft are reassessing how to allocate resources efficiently while still delivering innovative experiences. The consolidation of studios aims to eliminate redundancies, foster tighter collaboration, and ensure that development pipelines are aligned with strategic priorities.
Industry analysts have noted that while layoffs are always painful for affected employees, they can also signal a shift toward a more focused business model. By trimming excess management layers and concentrating on core franchises, Xbox hopes to streamline decision‑making and accelerate time‑to‑market for new titles. The acquisition of studios such as Ninja Theory and Undead Labs suggests that Microsoft remains committed to expanding its creative capacity, but in a more targeted fashion.
Looking ahead, the upcoming second round of layoffs could further reshape the internal landscape of Xbox Game Studios. Observers will be watching to see which divisions are merged, which projects receive renewed funding, and how the company balances its ambitions in both first‑party development and third‑party publishing. The ultimate goal, as Sharma articulated, is to position Xbox as a dominant entertainment platform that reaches over a billion daily users and offers creators a robust environment to build and share their visions. Whether these restructuring efforts will translate into measurable growth by 2027 remains to be seen, but the clear message from Xbox's leadership is one of decisive action: consolidate, simplify, and refocus in order to secure a sustainable, expansive future for the brand.