Xbox has made five rounds of mass layoffs sinceacquiring Activision Blizzard for $68.7 billion October 2023—but it seems that Microsoft CEO Satya Nadella feels that’s simply all part of a natural “streamlining” process.
The latest cuts were confirmed in July 2026 and will result in3,200 people being jettisoned from Xbox Game Studiosby the end of the current fiscal year. That reduction includes the divestment of notable studios such as Compulsion Games, Double Fine, and Undead Labs. Others like Arkane and Ninja Theory are also facing the very real threat of closure.
In 2025, Microsoft made anundisclosed number of cutsacross Xbox, targeting subsidiaries such as ZeniMax Online Studios and King. Prior to that, the company laid off 2,550 workers across two separate rounds of layoffs inJanuary 2024and<a href="https://comicvibe.com/top-12-telegram-games-worth-exploring-in-september-2026/” title=”Top 12 Telegram games worth exploring in September 2026″>September 2024. Arkane Austin, Tango Gameworks and Alpha Dog Games were also shuttered in May 2024, leading to additional job losses.
The full scale of Microsoft’s post-merger reckoning remains unclear, but we know the U.S. conglomerate has—at the very least—handed 5,750 workers their marching orders since October 2023.
According to Nadella, those years of tumult are simply a necessary evil. Speaking on the latest episode of the, Nadella said he feels “fantastic” about the franchises currently nestled within Xbox Game Studios. He also said it has been “great” to watch the “streamlining” happening under new Xbox boss Asha Sharma, whoreplaced previous overseer Phil Spencer in February 2026
“I feel fantastic about the IP we have right now. If I look at the studios, the IP portfolio we have, and our ability to then take that and produce great games going forward, I feel fantastic,” said Nadella.
“There’s some amount of streamlining the team is doing, and Asha is doing, which is great to see, and then we have to invent the right sustainable business model that allows us to deliver gaming to more and more people. That has always been the goal, which is, we want to be a great publisher and a great platform provider for games across both PCs and Xboxes.”
Nadella said Sharma has informed him that Xbox will achieve “growth” during the next fiscal year while also “producing some great games.”
That’s despite Xbox hardware (which is hardly setting the world alight at the moment) becomingincreasingly unaffordabledue to a component crisis caused by rampant investment in AI datacenters at the hands of companies likeMicrosoft itself.
It’s also important to consider that many of Microsoft’s remaining internal studios will now be tasked with revitalising the core franchises Xbox is hanging its future on while dealing with debilitating brain drain and uncertainty at the hands of their employer.
Speaking to Game Developer earlier this year, multiple Xbox workers impacted by the latest round of cuts seemed unsure how studios could possibly bounce back after losing so much senior talent and being forced to find a ‘new normal’ while the threat of even more layoffs hanging overhead.
“Triple-A game development is so collaborative and so interconnected [around] specialists that [laying off so many people] is like having a wide piece of cloth and taking out half the threads,” one person told Game Developer.
“The entire thing is going to fall apart because we depend so closely on each other, and you can’t just rip out a third or almost half of of your implementers—your direct implementers—and expect to have the same level of content. Not even close.”
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