Microsoft announced Monday what it calls "the most significant restructure in Xbox history," with 3,200 layoffs planned throughout fiscal year 2027, with 1,600 taking effect today. CEO Asha Sharma stated that "the Xbox business is not healthy" following bets that failed to pay off, including Xbox Game Pass.
Four studios are leaving Xbox: Double Fine and Compulsion Games will return to independence with funding for their next projects, while Ninja Theory and Undead Labs have been sold to new owners yet to be named. Arkane Lyon is undergoing "required consultation" to review "potential strategic options," leaving the future of Marvel's Blade uncertain. Microsoft confirmed that no games currently in development will be cancelled.
ZeniMax Media and Bethesda Softworks are also experiencing significant cuts. According to Bloomberg's Jason Schreier, ZeniMax will undergo a "significant overhaul" focused on its largest franchises: Fallout, The Elder Scrolls, DOOM, Quake, and Wolfenstein. Studios like id Software and ZeniMax Online Studios (developer of The Elder Scrolls Online) lost substantial portions of their teams. Katherine Souza, senior content designer at ESO, reported that "half the team" of active developers working on content, events, and dungeons was cut.
Sharma admitted the company "spread ourselves too thin" by aggressively expanding its studio portfolio since 2018, resulting in margins "three to ten times lower" than comparable platform and publishing businesses. The Bethesda Game Workers Union criticized the recurring cycle of cuts, asking "when will this cycle of cuts in pursuit of ever-greater profits end?"
