Xbox Restructuring Explained: 15,000 Job Cuts, Studio Exits, and Arkane Plans

Xbox leadership has confirmed a major restructuring, with layoffs and studio exits framed as part of a broader push to stabilize the business. In a message to staff, Xbox boss Asha Sharma said the company will cut 15,000 roles down to a workforce of 3,200 by fiscal year 2027, while also ending ties with four Xbox studios and working with the French government on Arkane’s next chapter.

Xbox confirms 3,200-job target and studio shake-up

Speculation about large-scale job cuts had been building since early June, as rumors pointed to a major Xbox cost-reduction push. That chatter intensified after the Xbox Games Showcase, which had many players reading the room as a sign the brand had regained momentum—only for subsequent updates to feel far more alarming.

In her staff letter, Sharma confirmed the numbers and timeline. By fiscal year 2027, Xbox expects to reduce headcount to roughly 3,200 employees total. As of July 6, 2026, the company says about 1,600 positions will have already been eliminated, and four studios will be leaving Xbox’s management structure.

Sharma also characterized Xbox’s current state as unhealthy, adding that Microsoft is effectively losing 64 cents for every dollar invested. Her explanation tied the shortfall to parts of the portfolio not expanding as expected, despite the overall business growing larger over the years.

She called the situation “painful” and “difficult,” and said the change is meant to stop the bleeding and reshape how the brand operates going forward.

Studio exits, management flattening, and what changes for players

The letter addressed multiple studio-level rumors that had circulated in the weeks leading up to the announcement. Sharma singled out four studios that are effectively moving out of Xbox’s ownership or control in some form.

Double Fine and Compulsion Games will return to independence, bringing their intellectual property and catalogs with them. Undead Labs and Ninja Theory, meanwhile, have “entered terms to join new ownership with funding,” with the stated goal of supporting growth for both Senua and State of Decay 3.

Microsoft is also working with the French government regarding the future of Arkane Studios and its currently developing title, Marvel’s Blade.

Beyond staffing and studios, Sharma said internal operations are changing. She referenced how some work previously traveled through as many as 14 management layers, which she said slowed decisions and created unclear accountability. The new structure aims to flatten the organization, limiting management layers to no more than five. Within that framework, Sharma said there will be “directly responsible individuals” who own key decisions and outcomes.

There’s also a notable leadership shift: Helen Chiang—previously associated with Mojang—is taking on the Chief Operating Officer role, reporting directly to Sharma. In addition, Mojang and King are said to report directly to Sharma as well, reflecting that both have become major homes for monthly active players.

One important topic not covered in the letter was the long-term direction of Xbox hardware—specifically, plans for Project Helix. As Xbox looks to become more sustainable and profitable, the company still faces questions about pricing amid rising component costs. While a release is expected to be some time away, Sharma previously flagged concerns about costs for parts such as RAM. With Project Helix and the PS6 both expected to arrive around or above $1000, pricing remains a major open issue.

PlayStation disc shift raises a new question for Xbox

Separate from the restructuring news, there’s been another ongoing industry discussion: PlayStation’s decision to end support for physical discs has led some players to wonder whether Xbox could consider a similar move. The Xbox letter didn’t address disc plans directly, but the timing has made the topic resurface quickly within the community.

With layoffs, studio exits, and a management rework now confirmed, the next things players will likely look for are what changes to development timelines and publishing focus these moves bring—especially for projects tied to the studios that are transitioning ownership or independence.