Xbox boss Asha Sharma confirmed the long-rumored layoffs taking place at the company in a new letter to the team, reducing staff by 15,000 employees to a total of 3,200 by fiscal year 2027. In addition to the job cuts, Microsoft is also cutting ties with four Xbox studios, while working with the French government on the future of Arkane. It's a dark day at Microsoft, one that Sharma calls "painful" and "difficult."
Rumors have been swirling since the beginning of June about plans for a significant layoff event at Xbox as Asha Sharma attempted to stop the bleeding that has been happening with the brand. Coming off a well-received Xbox Games Showcase, which appeared to show a renewed excitement and purpose for the brand, recent news has been much less than positive. With plans for an overhaul and a restructuring to rebuild the company's infrastructure and profit margin, there has been no shortage of questions regarding the upcoming changes, studio closures, and potential layoffs in the weeks since.
Following all the rumors and leaks regarding Xbox studio closures, official word has finally come from Xbox CEO Asha Sharma herself. In a new message to staff, which was officially posted online for transparency, Sharma confirmed that approximately 3,200 jobs will be reduced by fiscal year 2027. As of July 6, 2026, a total of 1,600 will be eliminated and four studios will be leaving Xbox management. Sharma revealed that the business as a whole isn't healthy, and that Microsoft has essentially been losing 64 cents per every dollar invested, due to some businesses not growing as anticipated with a portfolio that has grown bigger and bigger over the years.
For weeks, many smaller Xbox Game Studios have been subject to rumors of being closed. Sharma's letter also addressed four specific studios that are essentially leaving the brand in some capacity. For Double Fine and Compulsion Games, both studios are returning to independence, with their IPs and catalogs. Undead Labs and Ninja Theory have "entered terms to join new ownership with funding" which intends to help grow both Senua and State of Decay 3. Microsoft is also working with the French government regarding the future of Arkane Studios and its current in-development title, Marvel's Blade.
In addition to studio changes and staff reduction, Sharma also indicated that the Xbox operations will be changing. Previously, some parts of the company had work pass through as many as 14 layers of management, which she admitted slowed decision-making and blurred accountability. In an effort to simplify, the organization is being flattened and streamlined, with no more than 5 management layers that include "directly responsible individuals" who own key decisions and outcomes. Former Mojang leader, Helen Chiang is also taking on the Chief Operating Officer role, reporting directly to Asha Sharma. In addition, Mojang and King also now report directly to Sharma, as they both have quickly become the largest home for monthly active players.
One thing that wasn't mentioned in the letter was the long term future of Xbox, namely plans for the upcoming Project Helix hardware. As Xbox now attempts to refresh itself to be more sustainable and profitable, there's still the major question of pricing amid the rising costs of hardware. While still expected to be a ways off in terms of a launch, rising industry prices for certain parts, such as RAM, remain a big concern as both Project Helix and the PS6 are expected to launch around or above $1000. Sharma has previously indicated that the company is looking for potential solutions, but for now, nothing is certain.
