Xbox Restructures: About 3,200 Jobs Cut Through FY2027 as Company Refocuses on Fewer Franchises

Xbox’s July 6 restructuring was both a major layoff plan and a clear strategy reset. In a memo published that day on XBOX Wire, Xbox CEO Asha Sharma said the company would cut about 3,200 jobs through fiscal 2027 and move away from the broader studio-and-subscription approach that had defined its recent expansion, concentrating more of its resources on fewer established franchises.

Sharma called it “the most significant restructure in XBOX history.” The memo said about 1,600 roles were eliminated immediately on July 6, with additional cuts planned over FY27. It also said four studios would leave Xbox to new management. Compulsion Games and Double Fine Productions will return to independent management and keep their intellectual property, back catalogs and runway for their next games. Ninja Theory and Undead Labs have entered terms to join new ownership, with funding to continue work on “Senua” and “State of Decay 3.” Arkane Lyon was not confirmed as sold or transferred; Sharma said management in France was beginning the legally required works-council consultation to review “strategic options.”

The memo was unusually direct about why Microsoft was making the change. Sharma wrote that Xbox had been operating at margins “3–10x lower” than comparable platform and publishing businesses and said, “We lost 64 cents for every dollar we invested.” She said the company had bet on Game Pass, multi-platform releases and a broader content portfolio, but that those bets did not grow at the pace Xbox expected. Sharma, who was named EVP and CEO of Microsoft Gaming/Xbox in February, used the memo as her first major public restructuring announcement in the role.

Microsoft’s public position is that the changes do not include project cancellations among games it had already announced. “None of our first party publicly announced games or projects are being cancelled as part of these reductions,” Sharma wrote. But public layoff filings and subsequent reporting show how sharply the cuts are landing across parts of the organization.

WARN filings — public notices required for certain mass layoffs in the United States — have become the clearest public record so far for studio-by-studio job counts. In Maryland, filings tied to ZeniMax Online Studios and ZeniMax Media in Cockeysville listed 213 positions in one notice and 166 in another. A Texas WARN filing from ZeniMax Media listed 158 layoffs. Reporting based on that filing attributed 96 layoffs to id Software’s Richardson office, 40 to remote roles tied to that office and 22 to Bethesda Game Studios Austin. In California, a WARN filing reported by multiple outlets listed 52 Obsidian employees.

Some studios have tried to reassure players and staff about what remains in place. On July 10, id Software said publicly that it still had the team it needed and that “the team today is about the same size as when we were making DOOM (2016).” The statement suggested that while id was affected by the restructuring, its core development capacity remains intact by the studio’s own measure.

Other reporting points to a more explicit reprioritization of projects around larger, proven series. Bloomberg reported, citing people familiar with the matter, that Obsidian laid off about a quarter of its staff, canceled a planned “Avowed” sequel and was redirected to begin work on a new “Fallout” project led by Josh Sawyer in collaboration with Bethesda. Microsoft has not publicly confirmed those details.

Bethesda’s own public messaging has moved in the same direction. IGN reported that an internal email from Bethesda head Jill Braff told staff the company was moving away from planning around each studio’s next standalone project and toward “our strongest franchises.” Then, on July 17, Bethesda Game Studios said publicly that “The Elder Scrolls VI” is its primary development focus and that “Fallout 5” is in pre-production.

That sequence matters because it ties the layoffs to a documented shift in how Xbox says it will deploy its studios. Under the previous strategy associated with former Xbox chief Phil Spencer, Microsoft had assembled a much broader portfolio of internal teams to feed Game Pass with a wide range of first-party releases. Sharma’s July 6 memo explicitly described the reset as a correction after that model produced weaker-than-expected growth and lower margins.

Braff’s reported email distilled the new approach in the clearest internal terms: “We are shifting from a planning model primarily centered on what’s next for each independent studio to one that focuses on our strongest franchises.” Taken together with the job cuts, studio divestitures and project signals since July 6, Xbox’s reset amounts to a narrower operating model built around fewer bets and more established brands.