Microsoft's Xbox division has experienced significant upheaval and widespread layoffs since its landmark $68.7 billion acquisition of Activision Blizzard in October 2023. The move, intended to bolster first-party studios and enhance Xbox Game Pass, has instead been followed by extensive restructuring, including the elimination of thousands of roles, the cancellation of game projects, and the closure of several development studios. Xbox CEO Asha Sharma has characterized the Xbox business as "not healthy," attributing this to risky ventures and unmet expectations for Xbox Game Pass.
Early 2024 Restructuring
The first major wave of layoffs occurred in January 2024, impacting 1,900 employees, approximately 9% of the Xbox workforce. Phil Spencer, head of Xbox, described the decision as painful and necessary for establishing a "sustainable cost structure," primarily affecting areas of operational overlap. Among the casualties was Blizzard's Project Odyssey, an unannounced survival MMO that marked the studio's first original intellectual property since Overwatch in 2016.
Mid-2024 Studio Closures and Acquisitions
May 2024 saw further cuts, leading to the shuttering of several studios. Arkane Austin, known for Redfall, Alpha Dog, and Tango Gameworks, the developer behind Hi-Fi Rush, were directly impacted. Roundhouse Studios, a mobile game developer, was merged into Zenimax Online Studios. Microsoft stated these "tough decisions" were made to reallocate resources and concentrate on priority games. While exact numbers were not disclosed, PUBG publisher Krafton acquired Tango Gameworks, securing the rights to the Hi-Fi Rush IP for continued development and future projects.
September 2024 and July 2025 Layoffs
An additional 650 positions were cut in September 2024, affecting corporate, support, and administrative functions. Following a period of relative quiet, Microsoft announced a massive corporate layoff in July 2025, with over 9,000 employees affected globally. Xbox was disproportionately affected, with layoffs across multiple studios, game cancellations, and entire studios being closed. Phil Spencer reiterated that these measures were vital for Xbox's "enduring success."
During this period, Call of Duty developer Raven Software and Forza Motorsport developer Turn 10 Studios experienced significant staff reductions, with Turn 10 reportedly losing nearly half its employees. Rare's long-anticipated game Everwild was canceled, as was a new MMORPG codenamed Blackbird from The Elder Scrolls Online developer ZeniMax Online Studios. The Initiative studio was also shuttered, along with its first game, Perfect Dark. High Moon Studios and Sledgehammer Games, both involved in Call of Duty development, also faced layoffs. Blizzard announced the winding down of support for Warcraft Rumble. Halo Studios saw staff reductions while continuing work on multiple projects. Additionally, an unspecified publisher, widely believed to be Microsoft, canceled funding for a new game at Romero Studios.
Recent and Ongoing Restructuring
July 2026 marked another significant round of layoffs, with approximately 20% of Xbox's staff impacted. This began with 1,600 layoffs, with an additional 1,600 planned for the current financial year. Broad cuts have been implemented across all Xbox divisions. Studios such as Double Fine, Compulsion Games, Ninja Theory, and Undead Labs are exiting the Xbox umbrella. Double Fine and Compulsion will regain independence and retain their intellectual property, while Ninja Theory and Undead Labs are slated to find new owners. Arkane Studios, the developer of Marvel's Blade, is also leaving Microsoft, though its future ownership will depend on a mandatory strategic review and consultation period with its Works Council in France.
