Xbox plans layoffs this week: Arkane Lyon’s future is unclear

Xbox is Microsoft’s gaming division, and it’s reportedly preparing to begin layoffs around July 6, 2026. The cuts are being framed as a major reset of Microsoft’s gaming business, and reports say more than 1,000 employees could be affected. If that happens, it would amount to one of the biggest layoff rounds the games industry has seen.

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Reports citing an internal memo from Xbox CEO Asha Sharma and Chief Content Officer Matt Booty say Microsoft spent more than $20 billion on gaming over the past five years, not including Activision Blizzard. Over that same stretch, annual revenue declined, and the memo reportedly says the current operating model “cannot continue.”

Reports also say Arkane Lyon is being considered for closure or sale. This goes further than a simple leadership change. Marvel’s Blade could take a major hit too: the game is said to be over budget, to have been pushed internally from 2026 to late 2027, and to still be at risk of cancellation. Compulsion Games, Double Fine, Ninja Theory, and Undead Labs are also said to be under review.

If you follow Xbox’s first-party studios, keep an eye on this. Microsoft already shut down Arkane Austin in May 2024, and as of early July 2026, Microsoft, Arkane Lyon, and Marvel Games still haven’t publicly confirmed these claims.

You can watch Microsoft and Xbox’s public channels for any official update this week.