Xbox cuts 3,200 jobs and parts ways with five studios in the largest gaming industry layoff in years

Microsoft has announced sweeping cuts to its Xbox gaming division, eliminating 3,200 jobs and moving to divest five of its first-party studios as part of what CEO Asha Sharma has described as a fundamental business reset. The announcement, made on July 6, has been described by industry observers as potentially the largest single gaming industry layoff in history.

The details:

• 1,600 positions are being cut immediately, with a further 1,600 roles to go over the next 12 months, representing approximately 20% of Xbox's total workforce
• Five studios are being separated from Xbox: Ninja Theory, Undead Labs, Double Fine, Compulsion Games, and Arkane Lyon, with each taking a different path out of the company
• Ninja Theory and Undead Labs are being sold to new owners; Double Fine and Compulsion Games will transition into fully independent studios, retaining their IP, back catalogs, and receiving runway funding for their next projects
• Arkane Lyon, the Dishonored and Deathloop developer currently making Marvel's Blade, has begun formal consultation with its Works Council to "review potential strategic options," with the studio's fate and the game's future still unresolved
• Marvel's Blade had already slipped from a planned 2026 launch to late 2027 and was reported to be over budget; Bethesda's Todd Howard had publicly praised the project just days before the cuts were announced
• Sharma cited the division's financial state as the driver of the decision, noting that Xbox is operating at approximately a 3% profit margin, far below the roughly 30% Microsoft requires of its major divisions
• The five studios affected had all been publicly celebrating upcoming games at the Xbox Games Showcase just weeks earlier, with Ninja Theory having appeared on stage just nine days before being told it was closing