Today, Microsoft announced a massive restructure at its Xbox division, defined by its CEO, Asha Sharma, as the most significant in Xbox history.
According to the official post, which echoes a message Sharma sent to the company’s teams, approximately 3,200 employees will be laid off throughout the fiscal year 2027 (which for Microsoft started at the beginning of July and will end on July 30, 2027).
1,600 employees have been laid off today, and four studios will be spun off, although none will be closed for now.
Sharma recognizes that this is “painful” and attempts to justify the move with margins that are ” 3-10x lower than comparable platform and publishing businesses” and having entered this generation with a smaller installed base and a higher cost structure.
Compulsion Games and Double Fine Productions will be sold back to their management and will become independent.
On the other hand, Ninja Theory and Undead Labs will be sold to new owners and will have the funding to continue working on Senua and State of Decay 3.
A fifth studio, Arkane, is beginning consultations to “review potential strategic options.” This likely means that it’ll follow one of the routes of the four mentioned above.
Reductions in workforce have been made or will be made across other studios and teams, while investment will be in some cases shifted to higher priority projects across Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios.
No announced first-party games or projects will be canceled, for the moment. On top of that, Mojang and King will report directly to Sharma.
She continues, mentioning that before today’s changes, work at Xbox sometimes passed through 14 layers of management. These will be reduced to 5 or, where possible, 3.
Helen Chiang has been promoted to Chief Operating Officer with profit and loss responsibility across content, hardware, platform, and services, reporting directly to Sharma. She has been working at Microsoft for nearly twenty years, helping build Xbox Live and then leading Mojang.
Sharma’s stated goal is to “be one of the few companies that entertains more than a billion people each day and gives everyone the opportunity to create and connect.”
This follows a rather seismic shakeup at the top of Xbox earlier this year, which saw the departure of Phil Spencer and Sarah Bond.
This is certainly a dark day for Xbox and Microsoft, and all we can really say is that we hope that the thousands of developers affected will manage to find new creative homes where the suits don’t consider them expendable.
