Xbox Cuts 3,200 Jobs and Lets Four Studios Go in Its Biggest Restructure Ever

Monday brought the kind of news nobody in this industry enjoys reading. In an open letter titled Resetting Xbox, published on the official Xbox Wire, CEO Asha Sharma announced roughly 3,200 job cuts across the division through fiscal year 2027, with about 1,600 of them effective immediately. She calls it the most significant restructure in Xbox history, and for once the corporate superlative feels earned.

Four studios are leaving

The layoffs are only half the story. Four studios are leaving Xbox entirely. Compulsion Games and Double Fine Productions return to independence and keep their IP and back catalogs. Ninja Theory and Undead Labs are moving to new owners, with funding in place to finish the next Senua game and State of Decay 3. Arkane Studios in France, meanwhile, has begun a consultation with its Works Council on what the letter calls potential strategic options, which is the kind of phrase that rarely ends well.

There are leadership changes too. Helen Chiang, who ran Minecraft studio Mojang, becomes chief operating officer with responsibility across content, hardware, platform and services. Dave McCarthy retires after 17 years.

The numbers behind the decision

Sharma is unusually blunt about why. The letter states that the business is not healthy, that Xbox operates at margins 3 to 10 times lower than comparable platform and publishing companies, and that in a typical year the division lost 64 cents for every dollar it invested in its studios. Game Pass and the multiplatform push created value, she writes, but grew slower than expected.

The fix, as described, has three parts: reset the content portfolio, reset the platform, and reset operations. In practice that means fewer management layers, a 50 percent cut in vendor spending, and a promise that Xbox will return to growth in 2027.

Our take

We appreciate the honesty of the letter, and honesty is about the only kind thing we can say about it. Thousands of people are losing their jobs to pay for spending decisions they did not make, and that math never feels fair. For players, the practical questions are simpler. Double Fine and Compulsion going independent could genuinely be good news for their next games. Ninja Theory and Undead Labs at least keep their projects funded. The studio we are most worried about is Arkane, and we would rather say that plainly than pretend a consultation is neutral news. If Xbox truly returns to growth in 2027, we hope it remembers who paid for the reset.