Xbox Game Studios is set to undergo further significant reductions, with plans for three additional rounds of layoffs scheduled for October, November, and January. These cuts are part of an ongoing major restructuring under Xbox CEO Asha Sharma, which began after she announced in July that the company would reduce its headcount by 3,200 over the next year. To date, Xbox has already eliminated 1,868 jobs.
The report from Fortune highlights that these layoffs have disproportionately affected company veterans, potentially leading to a loss of valuable institutional knowledge. Despite ongoing rumors, Jason Althoff, CEO of Microsoft’s commercial business, has downplayed speculation that Xbox might be spun off or sold, stating that the division is not for sale and that Sharma is a top-tier leader.
Separately, industry reports suggest Microsoft is preparing for a new generation of hardware. A next-generation handheld device is reportedly slated for a 2027 launch, followed by the next major console, codenamed Project Helix, in 2028. These upcoming hardware releases are expected to be costly, with some estimates placing Project Helix's price point as high as $1,800.
Recent Studio and Development Shifts
This period of change has already seen Xbox divest from several studios, including Double Fine, Ninja Theory, Arkane Studios, Compulsion Games, and Undead Labs. While Ninja Theory and Arkane face potential closures, the other three studios have reportedly regained their independence from Microsoft following internal layoffs.
Studios that remain under Microsoft have also seen significant organizational changes. Development for the Halo series is now being managed by Activision, publisher of the Call of Duty franchise, potentially shifting Halo Studios into a support role. Obsidian Entertainment has been integrated under Bethesda's leadership and is reportedly working on a new Fallout title. Furthermore, the headcount reduction at id Software, the studio behind Doom, has been substantial enough that its capacity for large-scale projects akin to Doom: The Dark Ages may be impacted.
Sharma previously communicated to employees that the Xbox business "is not healthy," citing operating margins significantly lower than comparable industry businesses. She explained that while investments in Game Pass, multi-platform releases, and a broader content portfolio have generated value, their growth has not met expectations. The ongoing "reset" signifies a strategic pivot to address these challenges and reposition Xbox for future growth.