Xbox cuts up to 3,200 jobs and parts with five studios in its biggest shakeup

Xbox layoffs just became the biggest restructuring in the brand’s history.

On July 6, 2026, Xbox CEO Asha Sharma announced 1,600 immediate job cuts, rising to about 3,200 over the next 12 months. That is roughly 20 percent of Xbox staff, a scale the brand has never cut at before.

Five studios on the way out

The studio moves are just as sweeping as the headcount numbers. Five studios are leaving Microsoft’s first-party stable, each by a different door:

• Ninja Theory and Undead Labs are being sold
• Compulsion Games and Double Fine return to their management teams, taking their IP with them
• Arkane is in consultation on strategic options

One reassurance came with the announcement: reportedly, no previously announced first-party games are being canceled. The pipeline survives even as the org chart shrinks.

The end of the buying spree

The striking thing about this restructuring is the direction. For a decade, Xbox’s strategy was acquisition: buying studios large and small, from Double Fine all the way up to the $69 billion Activision Blizzard deal, the largest in gaming history.

Now the course is reversing. The same company that spent years collecting studios is selling them, handing them back to their founders, or reviewing their future. Double Fine, acquired with fanfare, exits with its IP under its own management again.

A smaller, leaner Xbox

The picture that emerges is a console business being rebuilt into something smaller and leaner. What that means for Xbox’s long-term shape, and for the studios now leaving with their independence and their IP, will play out over the next year as the cuts phase in.

For the studios themselves, independence cuts both ways: freedom to chart their own course, without a trillion-dollar parent covering the bills. Which of them turns independence into an advantage is now one of the more interesting questions in gaming.