Xbox’s Biggest Shakeup Yet: 3,200 Jobs Gone, Studios Set Free

Just when gamers thought the layoff waves of the past few years were finally settling, Microsoft has dropped another bombshell. This time, it’s Xbox’s turn — and the numbers are staggering.

In what’s being called the biggest restructuring in Xbox’s history, Microsoft plans to cut around 3,200 jobs throughout FY27. The news came straight from the top, via an internal memo from Xbox CEO Asha Sharma that quickly leaked online.

Why Is This Happening?

According to Sharma’s memo, Xbox has been struggling on multiple fronts — thin hardware margins, underwhelming console sales, and higher operating costs than rivals. Despite heavy investment in games, Game Pass, and multiplatform releases, revenue simply hasn’t matched expectations.

What’s Changing at Xbox?

The Bigger Picture

Two of Xbox’s beloved studios — Compulsion Games (known for We Happy Few) and Double Fine Productions (the studio behind Psychonauts) — are being spun off to operate independently, though they’ll retain their intellectual property. Meanwhile, Ninja Theory and Undead Labs are heading toward new ownership structures, with funding secured to complete their current flagship projects.

Microsoft is also flattening its leadership layers, a move meant to speed up decision-making. Helen Chiang’s appointment as Chief Operating Officer signals a tighter, leaner Xbox going forward.

For context on how gaming restructuring cycles typically play out industry-wide, Wikipedia’s overview of Xbox traces the brand’s journey from its 2001 launch to today’s crossroads moment.

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