Microsoft Announces Xbox Layoffs Affecting 3,200 Employees Through 2028

Microsoft disclosed that up to 3,200 Xbox employees will be laid off through the fiscal year ending March 31, 2028, with half of those positions eliminated immediately. The announcement, attributed to Xbox chief Asha Sharma, is part of a broader cost-reduction effort across the company.

Four internal studios will leave the Xbox label. Double Fine, the creator of Keeper and Psychonauts, and Compulsion Games, known for South of Midnight, will become independent while retaining their intellectual property. Ninja Theory, the studio behind Senua, and Undead Labs, developer of State of Decay 3, are being sold to undisclosed publishers, with assurances that their pending titles will be finished. Arkane, the studio behind Dishonored and Deathloop, may also see job reductions, though French labor law requires a consultation period before final decisions are made.

Other Xbox-affiliated studios have reported significant staff cuts. Id Software reportedly lost most of its coding team, according to statements from its founder. Zenimax Online Studios, the team behind Elder Scrolls Online, is said to have shed roughly half its workforce, while Obsidian has seen a 25 percent reduction.

The restructuring follows a memo earlier this month that outlined an "Xbox Reset" strategy. Microsoft also created a new chief operating officer role for Helen Chiang, tasked with overseeing profit and loss across content, hardware, platform and services, and placed Mojang and King under direct reporting to Sharma.

Analysts note that the layoffs may shift Microsoft’s focus toward established franchises and monetisation models, though the long-term impact on the broader Xbox ecosystem remains uncertain.