Xbox Announces Mass Layoffs Amid Financial Struggles

Xbox's latest financial struggles have led to mass layoffs and studio closures. On July 6, Microsoft announced it was cutting 3,200 jobs in its Xbox division, with another 1,600 employees losing their positions over the coming year. The company also attempted to shut down five development teams but ended up selling four of them instead.

The layoffs affected studios such as id Software, which lost around half its staff, and Obsidian Entertainment, where multiple projects were canceled, including a sequel to Avowed. Xbox's CEO Asha Sharma described the situation as 'not healthy,' citing low margins and declining revenue. The company spent over $20 billion on content, platform, and hardware investments in the past five years but saw annual revenue drop by nearly half a billion.

Xbox's union members expressed concerns about the human cost of repeated mass firings and accused Microsoft of prioritizing profits over people. The CWA filed lawsuits against Microsoft over unfair labor practices, and employees held protests outside their offices calling for 'people over profits.' Xbox's network also experienced an outage due to a bug that exposed the company's reliance on DRM.

Microsoft's Q4 2026 financial results showed a revenue decline of 10 percent for Xbox. The company's reported revenue fell by more than $2 billion year-over-year, placing it behind its closest competitor, PlayStation. This comes after two years of rolling layoffs at Xbox and eight years of acquiring studios, often prioritizing potential revenue over creative process.