Microsoft's ongoing "reset" of its Xbox division has led to another wave of 268 layoffs, with Xbox head Matt Booty stating that the company is approximately three-quarters of the way through its planned changes. This latest reduction in workforce follows an earlier announcement in July that saw 1,600 employees laid off, with further cuts anticipated throughout Microsoft's fiscal year 2027.
The restructuring efforts aim to address what Xbox CEO Asha Sharma described as an unhealthy state of the Xbox business. Sharma cited several factors contributing to the need for an overhaul, including the underperformance of the Game Pass strategy and a perceived shift away from exclusive titles that may have impacted the overall Xbox ecosystem. Despite increased investment in teams, games, and services, the company's core business reportedly weakened, exacerbated by industry-wide hardware shortages attributed to high demand for memory and components driven by the artificial intelligence boom.
This extensive restructuring occurs as Microsoft stands as one of the world's most valuable companies, with a market capitalization approaching $4 trillion. For its latest fiscal quarter, the company reported revenues of $90 billion and a net profit of nearly $36 billion. The juxtaposition of these significant profits with substantial workforce reductions has drawn criticism, with some industry observers labeling the situation as a result of "catastrophic mismanagement" and aggressive AI investments.
The recent layoffs have affected various first-party game development studios, including Halo Studios, as well as management and central functions teams within Xbox Game Studios. Notably, Booty confirmed that the next Halo game will be developed by Activision, rather than Halo Studios itself, indicating a significant shift in internal development strategy. Further layoffs are also reportedly imminent at Blizzard Entertainment, impacting its Warcraft and Diablo divisions.