Xbox cuts 3,200 jobs: its biggest studio shake-up yet

Microsoft’s Xbox division is cutting around 3,200 jobs in July 2026. Microsoft says the layoffs are part of an effort to get Xbox back to long-term profitability after weak financial results and a hardware market that’s been hard going. The move also reshapes Xbox’s studio lineup and, from where it stands now, looks like the biggest restructuring in the brand’s history.

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The studio shake-up is substantial. Double Fine and Compulsion Games are becoming independent again. Ninja Theory and Undead Labs are moving to new owners, although Senua’s Saga: Hellblade II and State of Decay 3 are still expected to continue.

Arkane Lyon is still up in the air. The studio behind Marvel’s Blade hasn’t been settled yet while Microsoft consults with French labor authorities, which leaves one of Xbox’s biggest upcoming projects in a more uncertain spot.

This is landing in an industry that’s already been hit hard by layoffs for years. A 2026 GDC report said 33% of U.S. game developers had been laid off in the previous two years. The latest cuts have already drawn criticism from labor groups and, according to reports, led to knock-on losses at partner studios in Europe.

If you follow Xbox’s first-party studios, this reset matters. Microsoft is narrowing its gaming focus in a big way.

For future updates on studios and projects, keep an eye on official Xbox and Microsoft channels.

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