Microsoft's Xbox Division Undergoes Massive Restructuring Amid Layoffs
Microsoft's Xbox division has been undergoing significant restructuring since acquiring Activision Blizzard for $68.7 billion in October 2023. The latest round of layoffs, announced in July 2026, will see 3,200 people let go from Xbox Game Studios by the end of the fiscal year. This includes the closure of notable studios like Compulsion Games, Double Fine, and Undead Labs.
Microsoft has made a total of five rounds of mass layoffs since acquiring Activision Blizzard, with an undisclosed number of cuts in 2025 targeting subsidiaries such as ZeniMax Online Studios and King. Prior to that, the company laid off 2,550 workers across two separate rounds in January and September 2024.
According to Satya Nadella, Microsoft's CEO, these layoffs are necessary for 'streamlining' the division. Speaking on a podcast, he expressed his confidence in Xbox's current franchises and praised new boss Asha Sharma for her efforts to revamp the division. However, many employees remain uncertain about their future, citing concerns over brain drain and uncertainty.
Nadella also mentioned that Xbox will achieve 'growth' during the next fiscal year while producing 'some great games.' Despite this optimism, industry experts have expressed skepticism regarding Microsoft's ability to bounce back from such significant layoffs. As one employee noted, 'Triple-A game development is so collaborative and interconnected [around] specialists that [laying off so many people] is like having a wide piece of cloth and taking out half the threads.'