Microsoft is preparing another round of job cuts that will reach deep into its Xbox gaming business, as the company tries to balance aggressive AI investment with the cost of maintaining a sprawling game studio portfolio.
Early warnings and studio anxiety
Signs of upheaval in Xbox began emerging in June, when reporting indicated Microsoft was set to announce “a wave of layoffs for its Xbox studios and employees” that could include studio closures, mergers, spinoffs, and canceled games.1 Among the most high-profile risks: Marvel’s Blade, developed by France-based Arkane Studios, which Microsoft is “weighing canceling” amid cost overruns and schedule delays.1
According to people familiar with the plans, Microsoft is currently considering closing at least five studios, including Arkane, while also exploring sales of several teams such as Compulsion Games, Double Fine, Ninja Theory, and Undead Labs.1 Some studios, like Compulsion Games, are reportedly bracing for closure and telling staff to look for jobs elsewhere, while Ninja Theory employees have been informed that Microsoft wants to close or spin off the UK-based studio.1
Company-wide cuts and an Xbox “reset”
In parallel, Microsoft is planning company-wide layoffs that will affect “thousands of roles, including sales and consulting, in addition to jobs at the Xbox gaming division.”2 This round is expected to be smaller than last year’s, projected at less than 2.5% of Microsoft’s roughly 220,000-person workforce.2
The cuts, anticipated to be announced next week, come as the company seeks to “rein in costs as it ramps up spending on AI” amid a stock slump and Wall Street pressure over how AI could reshape its software business.2 Within Xbox, layoffs have been anticipated since new gaming chief Asha Sharma called for a “reset” of the business, signaling a strategic reshaping that may leave some studios closed, others sold, and a smaller core organization focused on fewer, more tightly managed projects.12