The expected Xbox cuts are here, as CEO Asha Sharma follows through on earlier warnings about ‘difficult decisions’ They were on their way.
Microsoft’s gaming division is joining broader cuts at the company, which will see the elimination of thousands of positions across the company in the short and medium term. Preliminary sources suggest that the initial wave will see 1,500 employees affected at Xbox alone, with a total of 3,200 through FY27.
In an email to staff, Xbox CEO Asha Sharma described how Xbox is currently losing 64 cents for every dollar invested in the current climate.
“We are beginning the most significant restructuring in XBOX history. After careful consideration, I made the difficult decision to reduce our team by approximately 3,200 during FY27.”
As part of the cuts, Microsoft has reached agreements with four studios to become independent or join new management, saving them from closure.
Compulsion, known for South of Midnight, will be acquired by management and become independent again. Double Fine Productions will also become independentdirected by Tim Schafer. Undead Labs and Ninja Theory will be acquired by new editors. Sources told us over the weekend that Both Senua and Labs by Ninja Theory State of Decay 3 will remain fully in production as part of the divestment agreements.
However, there is a question mark over Arkane and Blade. Microsoft is collaborating with the French government to try to find a way forward for the legendary Dishonored maker, with the aim of saving Arkane from closure.and keep Blade in production. At this point, we can only hope that Arkane finds a suitor to help keep the Dishonored and Blade maker afloat.
This is an important email I sent today to all XBOX employees: Team, we are beginning the largest restructuring in XBOX history. After careful consideration, I made the difficult decision to reduce our team by approximately 3,200 people during FY27. This will include…July 6, 2026
Beyond that, to meet the reductions that Sharma has outlined All departments at Xbox will see some type of layoffs and restructuring. Microsoft’s executive layers want to reduce middle management across the board, in an attempt to help Xbox move more quickly. Minecraft and Candy Crush’s King will begin reporting directly to Xbox senior management, for example, with a view to making them more competitive against traditional companies like Roblox and things like Monopoly Go, respectively.
There is also an effort to bring some of the remaining Xbox studios into closer collaboration, focusing on some of the company’s biggest franchises and potential. Xbox CEO Asha Sharma has been transparent about wanting to focus on things like Halo and Fallout. We could see studios like Obsidian dusting off their Fallout mantle, for example.
What’s wrong with Xbox hardware? It has been suggested to me that the Xbox hardware team will see the least amount of reductions, and Microsoft still intends to ship Xbox and Xbox Helix hardware.
The next generation of Microsoft Xbox propeller The console has been in production for some time, although the structural equations have been greatly affected by the memory availability crisis affecting all consumer technology. Yet, I’m told that Microsoft will continue to move forward with Helix hardware and Xbox in general. Microsoft still intends to continue Xbox CEO Sharma’s plan to “rebuild the core” with a focus on Xbox’s most profitable users: console users.
A sad day for Xbox and the industry in general.
It’s painful to me that Microsoft’s accountants wouldn’t let Xbox hold out just a little more time with some of these studies. It’s not Undead Labs’ fault that their integrations were defeated by Covid lockdowns and the departure of previous management. State of Decay 3, for example, has more wishlists on Steam than some of the other major Xbox projects. In my opinion, it easily has the potential to be even bigger than similar multiplayer titles like Grounded or Sea of Thieves. It’s surely been a long and expensive road to get here… but the rewards were literally around the corner. Couldn’t Microsoft have stayed the course for just a bit More time on some of these things? Microsoft’s tendency to give up at the last hurdle is always irritating.
Xbox gave some of its studios freedom to explore new IPs and experimental titles, which, while virtuous, potentially hurts their ability to return positive news to higher-ups working on spreadsheets. It’s also hard to argue against Asha Sharma’s notes to staff about not wanting to compete with indie developers. It’s a strange universe where Microsoft, the giant, is creating games that would otherwise be produced by comparatively much smaller teams with non-existent marketing budgets.
It’s hard to deny that Xbox has dropped the ball massively on things like Fallout and Halo. Hindsight is 20/20, but imagine if the Fallout TV show had a mainline Fallout game to complement its popularity? Cyberpunk 2077 has just reached 40 million copies soldand is seeing another increase in player count due to integrations in Wuthering Waves and Cyberpunk Edgerunners Season 2 on Netflix.
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Some of these plans revolve around laying the groundwork to take advantage of these missed opportunities. It should lead to a stronger Xbox in the coming years. But at the same time, it is employees who pay the price for previous decisions, whether due to management errors, evolving user behavior, or macroeconomic factors that no one could really predict. It’s not fair, is it? For all concerned, it’s just another round of unnecessary chaos in our cold, AI-Fun money-driven economy.
“These changes are about a bigger future for XBOX, not a smaller one,” Asha Sharma pointed to the employees. “The next decade of gaming will be bigger, more global and more creative than anything we’ve seen before. This year, we will invest in XBOX as much as we ever have, but we will invest with greater focus, greater discipline and greater clarity, all in the service of making XBOX the place where the world plays and creates.”
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