The time has finally come, as Xbox CEO Asha Sharma has announced layoffs throughout fiscal year 2027. Approximately 3,200 employees will be affected, with 1,600 layoffs occurring today. It’s also releasing four studios – Ninja Theory, Compulsion Games, Double Fine Productions, and Undead Labs.
“I know this is painful. These changes will directly affect people who have poured their creativity into building Xbox,” said Sharma. “Many joined us through acquisitions, while others were recruited here, or sought us out because they loved this industry and loved Xbox. Today’s decisions do not reflect their talent or dedication.”
Sharma noted that Xbox had been operating “at margins that are 3-10x lower than comparable platform and publishing businesses.” She also highlighted the challenges of the current console generation, and how Xbox had not grown as quickly as expected.
“As that happened, our core business weakened, and we added more teams, more investment, and more time, hoping for a better outcome. And now the industry is facing the most severe hardware crisis in its history. We must reset Xbox.”
Compulsion Games and Double Fine will return to being independent and maintain their IP along with “runway” for their next games. Meanwhile, Ninja Theory and Undead Labs will be under new ownership and complete Senua and State of Decay 3 respectively. Meanwhile, Arkane Studios will undergo consultation and “review potential strategic options” with its Works Council.
Otherwise, you can expect Activision, Bethesda, Blizzard, Mojang, Xbox Game Studios and King to face varying reductions. Xbox will also be “shifting investment to focus on higher priority projects,” but no publicly announced first-party titles will be cancelled.
“Since 2018, we have aggressively expanded our studio portfolio while the number of games created each month across the industry now outpaces the last ten years combined. We now find ourselves competing not only with the largest publishers, but also with smaller independent studios. It is neither possible nor desirable to own every great independent studio.
“We have also learned that we are not the best home for every type of studio; in a typical year, we lost 64 cents for every dollar we invested. As we reset Xbox, we will help independent creators succeed by providing open development tools and audiences to realize their vision.”
It’s a massive shift for Xbox, and one that’s bound to have consequences for the industry as a whole. Keep in mind that none of this even addresses the issues that the company will face with its next-gen console, Project Helix, especially as memory and storage costs continue to skyrocket. The rumors about the lack of a disc drive, especially with PlayStation announcing the end of physical discs for new titles starting from January 2028, hasn’t helped either. As always, stay tuned for more updates.
