Xbox to lay off 3,200 employees, drop up to five studios

The "reset" is in full swing.

Microsoft’s Xbox will lay off 3,200 employees and drop up to five studios from its portfolio, CEO Asha Sharma has confirmed in an internal email to staff.

In what Sharma today has today and previously termed a “reset”, Compulsion Games and Double Fine studios will become independent, while Undead Labs and Ninja Theory will be sold off. A fifth studio, Arkane Studios, will either be sold or spun out — in Sharma’s words as part of a process that will “review potential strategic options” — with Xbox not yet sure of its strategy and also needing to work within strict French labour laws.

“Our business today is not healthy,” Sharma wrote in an address to staff, as sighted by Bloomberg. “We must reset Xbox.”

“After careful consideration, I’ve made the difficult decision to reduce our team by approximately 3,200 throughout FY27,” Sharma continued, as also reported by Aftermath. “This will include approximately 1,600 role eliminations today, and in addition, four studios will leave Xbox to new management.”

Sharma also confirmed that there will be “reductions across other units,” alongside “shifting investment to focus on higher priority projects” at studios across Activision, Bethesda, Blizzard, King, Mojang, and Xbox on the whole.

“Once again, Double Fine Productions will be an independent studio,” the developer said on social media following reports. “We will share more soon on what comes next.”

“Today, we’re sharing that Compulsion Games will return to independent management following our time as part of Xbox,” Compulsion Games added on its own social media account. “As part of this transition, we will retain the rights to Contrast, We Happy Few, and our award-winning South of Midnight.”

Sharma also confirmed that no “first party publicly announced games or projects are being cancelled” as a result of this new wave of layoffs.