Xbox will cut up to 3,200 jobs as CEO Asha Sharma unveils a sweeping restructuring plan that also places four game studios under new ownership and management.
Xbox Begins Its Biggest Restructuring Yet
July 07, 2026 – Xbox is undergoing one of the most significant changes in its history after CEO Asha Sharma announced a major restructuring that will eliminate up to 3,200 positions across the business over the next year. Approximately 1,600 employees are leaving immediately as part of the first phase of the plan.
In a memo sent to employees, Sharma described the move as a necessary reset, saying Xbox’s current business model is no longer sustainable. She acknowledged the difficult impact on employees while emphasizing that the company must simplify its structure to remain competitive in a rapidly evolving gaming industry.
The announcement marks the largest organizational overhaul since Sharma became Xbox CEO earlier this year.
Credit: Microsoft
Four Studios Shift to New Management
As part of the restructuring, four Xbox-owned studios will move under new ownership or management. The affected studios are Double Fine Productions, Compulsion Games, Ninja Theory, and Undead Labs. According to Xbox, existing projects at the studios will continue, with efforts being made to minimize disruption for developers and players.
The changes represent a significant shift in Xbox’s strategy. Rather than continuing to expand its first-party studio portfolio, the company is focusing on streamlining operations while allowing several teams to operate independently or under new investors.
Xbox also confirmed it is exploring strategic options for Arkane Studios, although no final decision has been announced.
Why Xbox Is Making These Changes
In her message to employees, Sharma explained that Xbox faces increasing financial pressure despite owning some of the gaming industry’s biggest franchises. She pointed to declining console sales, rising development costs, and operating margins that trail many competitors.
According to Sharma, the company has become too complex following years of acquisitions, making decision-making slower and limiting long-term growth. She said the restructuring is intended to reduce management layers, simplify operations, and concentrate resources on Xbox’s highest-priority games and services.
The plan also includes appointing new operational leadership while reorganizing how Xbox’s publishing, platform, and studio teams work together.
Focus Shifts to Core Franchises
Despite the layoffs, Xbox says it remains committed to investing in gaming. Asha Sharma explained that the company will continue supporting major franchises across Xbox Game Studios, Bethesda, Activision, Blizzard, King, and Mojang while placing greater emphasis on projects with the strongest long-term growth potential.
The restructuring reflects a broader effort to prioritize fewer, larger projects rather than maintaining an increasingly complex portfolio of internal studios. Xbox believes the streamlined approach will improve efficiency while allowing independent development teams greater flexibility under their new management structures.
Industry Reacts to the Announcement
The news has prompted widespread discussion throughout the gaming industry, particularly given the scale of the layoffs and the number of studios affected. Developers, players, and industry analysts have expressed concern about the impact on employees while also questioning what the changes may mean for future Xbox exclusives.
The announcement follows several years of workforce reductions across the broader video game industry as publishers respond to rising development costs, changing player habits, and increased financial pressure. Xbox’s restructuring is now among the largest gaming industry shake-ups in recent years.
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Impact on Employees and Ongoing Projects
The restructuring has created uncertainty for thousands of Xbox employees, many of whom are now facing career transitions as part of the company’s largest organizational overhaul to date. Xbox said it will provide severance packages, career support, and transition assistance to affected workers, though the scale of the layoffs has prompted concern across the gaming community.
For players, Xbox stressed that games currently in development at the affected studios will continue despite the organizational changes. Projects including Senua from Ninja Theory and State of Decay 3 from Undead Labs are expected to remain in production under their new management structures.
The company hopes the transition will minimize disruption while allowing development teams to complete their planned releases.
What It Means for Xbox’s Future
The restructuring signals a significant shift in Xbox’s long-term strategy. After years of expanding through major acquisitions, the company is now focusing on operating more efficiently while prioritizing its largest franchises and core gaming services.
According to Asha Sharma, the goal is to simplify decision-making, reduce management layers, and build a healthier business capable of long-term growth. Xbox also plans to strengthen collaboration across its remaining studios while investing in projects with the greatest commercial potential.
Industry analysts believe the coming months will reveal whether the reset improves Xbox’s financial performance and competitive position.
Gaming Industry Faces Continued Change
Xbox’s announcement is the latest in a series of workforce reductions affecting the video game industry over the past several years. Rising development costs, longer production cycles, changing consumer habits, and increased investment in artificial intelligence have forced many publishers to rethink their business strategies.
While Xbox remains committed to developing games and supporting its biggest franchises, the restructuring illustrates the challenges facing even the industry’s largest publishers as they adapt to a rapidly changing market.
The company’s next releases and studio performance will likely shape perceptions of whether this extensive overhaul ultimately achieves its intended goals.
Final Thoughts
Xbox’s decision to eliminate up to 3,200 jobs and move four studios under new management represents one of the biggest restructurings in the brand’s history. Although the changes are intended to improve efficiency and strengthen the business, they also mark a difficult period for thousands of employees and several well-known development teams.
As Xbox begins implementing its new strategy, attention will turn to how the restructuring affects future game releases, studio operations, and the company’s long-term position within the gaming industry.
FAQs
How many jobs is Xbox cutting?
Xbox plans to eliminate 3,200 positions, with approximately 1,600 employees leaving during the first phase of the restructuring.
Which studios are leaving Xbox?
Double Fine Productions, Compulsion Games, Ninja Theory, and Undead Labs will move under new ownership or management.
Why is Xbox restructuring?
CEO Asha Sharma said the company is simplifying operations after rising costs, declining hardware sales, and lower operating margins made the current business model unsustainable.
Will current Xbox games be cancelled?
Xbox says ongoing projects at the affected studios will continue during the transition.
Who is leading Xbox’s restructuring?
Xbox CEO Asha Sharma is overseeing the company’s restructuring plan and long-term strategic reset.
Published by HOLR Magazine