Microsoft’s XBOX will reportedly lay off 3,200 workers — about 20 percent of its total workforce — and divest five first-party video game development studios. A new Bloomberg report published on Monday confirms feared closures and layoffs proposed in a foreboding June 10 joint memo from XBOX CEO Asha Sharma and Chief Content Officer Matt Booty. According to Bloomberg, 1,600 roles will be eliminated on Monday, July 7, with the remaining 1,600 eliminated over the next 12 months.
In total, Microsoft is planning about 6,400 cuts, affecting just under 3 percent of the company’s 228,000 workers. In the memo, Sharma also adds that Dave McCarthy, XBOX Product Services’ Corporate Vice President, will step down after 17 years with the company.
CEO Asha Sharma shared a “Resetting XBOX” message on Monday morning via XBOX Wire. “Our business today is not healthy,” said Sharma, before revealing the brand is currently “operating at margins that are 3-10x lower than comparable platform and publishing businesses.”
“We entered Gen 9 with a smaller install base and a higher cost structure. To grow, we bet on Game Pass, multi-platform, and a broader portfolio of content. While those businesses have created meaningful value, they did not grow at the pace we 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.” Sharma then lays out steps the brand will take to “reset XBOX”: Resetting the brand’s content portfolio, resetting their platform, and ultimately, resetting how XBOX operates.
“These changes are about a bigger future for XBOX, not a smaller one. The next decade of gaming will be larger, more global, and more creative than anything we’ve seen before. This year, we’ll invest as much in XBOX as we ever have, but we’ll invest with greater focus, greater discipline, and greater clarity, all in service of making XBOX where the world plays and creates.”
Amid brand tumult, Helen Chiang has reportedly been named the brand’s new COO of Profit and Loss Responsibility.
XBOX game studio divestments confirmed by brand CEO Asha Sharma
As part of the “reset,” XBOX will sell Hellblade studio Ninja Theory and State of Decay developer Undead Labs to undisclosed buyers. Both will reportedly continue to work with XBOX on their respective projects, Senua and State of Decay 3. Studios Double Fine (Psychonauts; Kiln) and Compulsion Games (South of Midnight) will return to private ownership under their founders. As part of this arrangement, Sharma says both studios will receive “runway funding and full ownership of the intellectual property they have developed, including their catalogs of previous games.”
French studio Arkane Studios (Blade) will reportedly undergo a consultation process with XBOX to “review potential strategic options” over the next few months to identify a potential buyer, a process expected to take longer due to French labor laws.
“I want XBOX to be one of the few companies that entertains more than a billion people each day and gives everyone the opportunity to create and connect. I know we can achieve this goal. XBOX has many of the most beloved franchises in entertainment history, talented studios around the world, and we will return to growth in 2027. History is full of companies that mistake longevity for inevitability. We will not be one of them.”
The XBOX “reset” is the division’s latest strategy to supplement parent company Microsoft’s untethered tech spending, specifically on AI-fueling data centers. As C-suite execs across global tech conglomerates continue to invest in AI, working-class team members shoulder the burden through job losses, project cancellations, or full-blown shutdowns.
This is a developing story. Stay with Outrun Gaming for more information as it becomes available.
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