Xbox has initiated a significant restructuring, marked by widespread layoffs and the divestiture of five studios, as the company pivots towards a new strategic direction. Following a period of aggressive acquisitions and substantial investments in Xbox Game Pass, combined with economic pressures, Xbox CEO Asha Sharma announced a renewed focus on profitability, streamlining management, and centering on key intellectual properties.
This shift has resulted in multiple waves of layoffs since 2023, with the most recent occurring in July 2026. Sharma's stated goal is to increase profit generation and reach one billion people daily through entertainment, a strategy that has impacted developers across the organization. The full extent of these changes on ongoing and future projects may take years to materialize.
Among the studios affected by the latest cuts, Ninja Theory and Undead Labs are slated for unspecified new ownership. Double Fine Productions and Compulsion Games are returning to independent operations, while Arkane Lyon is exploring strategic options with its French Works Council.
Key Franchises and Development Focus
The Call of Duty franchise remains a central pillar for Xbox, with Call of Duty: Modern Warfare 4 anticipated. This series, supported by numerous core and auxiliary studios including Infinity Ward, Raven Software, and Activision Shanghai Studio, is now expected to forego day-one releases on Xbox Game Pass, encouraging direct sales.
Bethesda Game Studios is under pressure to deliver Fallout 5 and The Elder Scrolls 6. Despite ongoing work on Starfield and Fallout 76, developers believe recent layoffs may negatively impact the progress of The Elder Scrolls 6.
Blizzard Entertainment is concentrating on its established brands like Diablo, Overwatch, and Warcraft, with ongoing seasonal content for Overwatch and the recent Lord of Hatred expansion for Diablo 4. The return of BlizzCon in September is expected to provide further insights into Blizzard's future plans.
The Coalition is nearing the completion of Gears of War: E-Day, set for an October 6 release and positioned as a major Xbox tentpole title. This game will be exclusive to PC and Xbox, reflecting Xbox's ongoing reevaluation of its multiplatform strategy.
Elsewhere Entertainment, an Activision-affiliated studio in Europe, is developing an unannounced original IP.
Engine Shifts and New Releases
Formerly known as 343 Industries, Halo Studios is preparing to launch Halo: Campaign Evolved on July 28. The studio has also faced layoffs and is working on the next iteration of the franchise, tentatively titled Halo Next, alongside potential remakes of Halo 2 and 3. Notably, all development has transitioned from the proprietary Slipspace Engine to Unreal Engine 5.
Id Software, significantly impacted by the recent cuts, has released a new expansion for Doom: The Dark Ages. The studio had reportedly considered a multiplayer Doom spin-off and a John Wick-inspired game called Fury, while continuing work on its IdTech Engine.
InXile Entertainment's Clockwork Revolution, a first-person RPG shooter with a steampunk aesthetic, is anticipated in 2027. Acquired by Microsoft in 2018, the game draws inspiration from BioShock with a distinct British tone.
King, the developer behind Candy Crush Saga, will now report directly to Xbox CEO Asha Sharma. In addition to its flagship mobile title, the studio is developing Minecraft Blast, a match-three game.
MachineGames, following its work on Indiana Jones and the Great Circle, is rumored to be developing a new entry in the Wolfenstein series.
Mojang Studios, the creator of Minecraft, will also report directly to Sharma, with franchise veteran Helen Chiang promoted to Xbox Chief Operating Officer. Minecraft remains a top seller for Microsoft.
Obsidian Entertainment, despite recent layoffs, has a busy slate. Following Avowed and The Outer Worlds 2 in 2025, reports suggest a canceled Avowed sequel in favor of a new Fallout game.
Playground Games is gearing up for the Fable reboot in February 2027, which will include post-launch DLC. The studio has a strong track record with the Forza Horizon series, with Forza Horizon 6 releasing this year.
Rare's focus has shifted heavily towards Sea of Thieves. The studio's new game, Everwild, originally announced in 2019, was canceled in 2025 after struggling to find a clear direction, and Rare was affected by layoffs.
Turn 10 Studios, known for Forza Motorsport, experienced significant layoffs last year. Content updates for Forza Motorsport have concluded, and the studio is reportedly in a support role for Playground Games' Forza Horizon 6.
World's Edge continues to support the Age of Empires and Age of Mythology franchises, including post-launch support for Age of Mythology: Retold and Age of Empires 4, alongside work on Age of Empires 2: Definitive Edition and organizing esports events. This studio appears to have been largely unaffected by the recent cuts due to its specialized nature.
ZeniMax Online Studios saw nearly half its staff retrenched. The studio was working on a new online game described as a blend of Destiny 2 and Cyberpunk 2077, but this project was canceled in 2025, leaving fewer resources for The Elder Scrolls Online.