Xbox to cut 3,200 jobs, spin off four studios

Xbox will eliminate about 3,200 positions across fiscal 2027 and move four studios to new ownership, beginning with roughly 1,600 job cuts announced today, CEO Asha Sharma wrote in an internal memo. She described the reorganisation as the company’s largest to date.

Two studios, Compulsion Games and Double Fine Productions, will return to independent status and will take their intellectual property, back catalogues and funding for their next projects with them. Ninja Theory and Undead Labs have reached terms to move to new owners, with funding committed to recently announced games including Senua and State of Decay 3 through to completion. Arkane’s management has begun a Works Council consultation in France to review options, making it the fifth studio under review. The memo states that none of Xbox’s publicly announced first-party games are being cancelled as part of the changes.

The reductions will also affect teams across Activision, Bethesda/ZeniMax, Blizzard, King, Mojang and Xbox Game Studios to varying degrees. The cuts will be implemented over the 2027 financial year and start immediately with the initial wave of about 1,600 roles.

Sharma wrote that Xbox’s business is not healthy and cited margins that are three to ten times lower than comparable platform and publishing businesses. She said the division entered the current console generation with a smaller installed base and a higher cost structure, and that bets on Game Pass, multiplatform releases and a broader content portfolio did not grow as expected. The memo estimates that in a typical year Xbox lost $0.64 for every dollar invested in studios and adds that the company has learned it is not the best home for every type of studio.

The reorganisation targets internal layers and vendor spending. Some parts of the company had as many as 14 layers of management; the plan is to cut management layers to no more than five and ideally three. Platform teams will be reduced in size and vendor spend is expected to fall by about 50 percent.

Leadership changes will take effect as part of the restructure. Mojang and King will report directly to Sharma. Helen Chiang has been promoted to chief operating officer with responsibility across content, hardware, platform and services. Long-serving executive Dave McCarthy is retiring after 17 years with the company.

Sharma framed the actions as a reset aimed at restoring growth and forecasted a return to growth in 2027. In the staff memo she wrote, “Our business today is not healthy,” and closed with a warning that “history is full of companies that mistake longevity for inevitability. We will not be one of them.”