Xbox just had its worst week in years, and it’s not close.
New CEO Asha Sharma confirmed on July 6 that 1,600 employees have already lost their jobs as part of what she’s calling a company “reset,” with another 1,600 expected to follow before the 2027 fiscal year ends. That’s before counting cuts elsewhere across Microsoft. Sharma called it the most significant restructure in Xbox’s history, and for once that’s not marketing spin. No studios have been closed outright, and Sharma says no announced first-party games are being cancelled.
Here’s how each Xbox studio has actually been hit
Compulsion Games (South of Midnight, We Happy Few, Contrast) is being spun off into full independence. It keeps its IP, its back catalogue, and enough runway to get its next game made without Xbox’s name on the building anymore.
Double Fine (Psychonauts, Grim Fandango, Keeper) gets the same deal. Independent, IP intact, free to keep working on what’s next.
Ninja Theory (the Senua/Hellblade series) isn’t going independent; it’s changing owners entirely. New ownership has reportedly agreed to fund finishing and growing the franchise, so Senua’s story continues, just not under Xbox.
Undead Labs (State of Decay) is in the same boat. New owners, fresh funding, and State of Decay 3 is apparently still happening under that new setup.
Xbox confirms first wave of layoffs as more job cuts planned through 2027
Arkane Lyon (Dishonored, Prey, Deathloop, the recently released Blade) is the one nobody has a clear answer on yet. Management has opened required talks with its Works Council to weigh what’s next, which is corporate language for “nothing’s confirmed, brace yourself.”
Activision (Call of Duty, Crash Bandicoot) is taking “reductions” as Microsoft shifts investment toward what it calls higher priority projects. No specifics on numbers.
Blizzard (Overwatch, World of Warcraft, Diablo) is getting the same vague “reductions” line. According to Bloomberg’s Jason Schreier, staff were told today that they won’t find out how the reorg affects them until further communication. So people are sitting there unemployed-adjacent with zero clarity.
Bethesda/ZeniMax (Fallout, Elder Scrolls, Doom, Wolfenstein) is where the damage looks worst on paper. Per Schreier, id Software and ZeniMax Online Studios are each cutting roughly half their workforce.
King (Candy Crush) and Mojang (Minecraft) both get the identical “reductions, shifting investment” treatment, with no numbers attached either.
Strip away the corporate phrasing and the pattern’s obvious: the smaller, cheaper-to-run studios got cut loose to survive on their own, the ones making a single franchise got sold to whoever would keep funding them, and the giants making the actual money got quietly gutted from the inside while being told the least.
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