Microsoft's Xbox division is reportedly preparing for a second wave of layoffs, with new reports indicating a significant restructuring of its gaming studios. According to The Information, which cited a source briefed on the company's plans, the impending job cuts will affect approximately 1,600 employees, adding to the 1,600 roles eliminated in July.
This move aligns with broader plans announced by Xbox boss Asha Sharma to make the division more profitable. The ongoing "reset" initiative has already led to numerous job cuts and the divestment of several first-party studios. Among these, Double Fine Productions and Compulsion Games have reportedly transitioned back to independent studios. Undead Labs, the developer of State of Decay 3, and Ninja Theory, known for Senua's Saga: Hellblade II, have also been sold off. Arkane Lyon is also reportedly seeking to separate from Microsoft after completing a mandatory consultation period with its French Local Works Council.
Recent reports also suggest a potential shift in franchise management, with claims that the Halo franchise may move to Activision Blizzard. Similar reorganizations are anticipated across the division, potentially marking 2026 as a year of substantial change for Xbox. The company appears to be concentrating its focus on its largest franchises, as evidenced by Bethesda's recent confirmation of Fallout 5 and remasters of Fallout 3 and Fallout: New Vegas. Concurrently, studios like id Software and Zenimax Online have experienced significant layoffs as part of Microsoft's effort to reduce its Xbox workforce by approximately 20%.