Xbox Shakes Up Its Studios: 3,200 Jobs Cut in Microsoft’s Biggest Restructure

Microsoft says it’s launching what Xbox leadership calls “the biggest reshuffle in Xbox’s history,” with sweeping job cuts and studio changes tied to the reorganization. Xbox CEO Asha Sharma confirmed that 1,600 roles will be eliminated today, and an additional 1,600 positions are expected to go during the rest of the current financial year. The plan also involves four studios exiting Microsoft, with at least one potentially being sold or shut down if it can’t secure a buyer.

Key takeaways

• Xbox leadership says the changes represent the most significant restructure in the division’s history.
• Xbox CEO Asha Sharma confirmed 1,600 layoffs start today, with 1,600 more planned during the current financial year.
• Microsoft says four studios are leaving the company as part of the restructuring.
• One studio could be sold or closed later if it fails to find a buyer.
• Undead Labs is described as being sold with support intended to finish and expand State of Decay 3.

Double Fine and Compulsion Games

Double Fine and Compulsion Games have both released public statements after reports emerged about today’s large-scale Xbox cuts. In their updates, the studios addressed what the changes mean for them, emphasizing their plans to continue operating as independent teams. The announcements also touch on the broader uncertainty around other projects, including the future of Psychonauts and South of Midnight.

State of Decay 3

Sharma stated that Undead Labs will be sold “with funding to complete and grow” State of Decay 3. That wording strongly implies the zombie sequel still has a path to finishing and eventually releasing, though several details remain unclear. For example, it’s not yet known who would purchase the studio, and it’s also unknown whether the sale process could lead to additional staffing reductions.

State of Decay 3 was last shown during the Xbox Games Showcase in the previous month. At that reveal, the game received a fresh trailer along with a target release window set for 2027.