Xbox Layoffs: Video Gaming Brand To Consolidate Game Studios and Cut Hundreds of Jobs, Says Report

Xbox is reportedly planning to consolidate several of its game development studios in a second wave of major layoffs scheduled for this week, according to a report from The Information. Citing a source briefed on Microsoft’s internal roadmaps, the report indicates that the tech giant intends to lay off hundreds more employees as part of an aggressive restructuring across its gaming division.

While the report does not elaborate on how the studio consolidations will ultimately pan out, it points toward potential mergers or structural realignment across its core publishing arms: Xbox Game Studios, Bethesda, Activision, and Blizzard. The impending actions follow a wider cost-reduction target set earlier this summer to recalibrate overhead and streamline game development pipelines. Xbox Layoffs Leave Staff Grieving Amid Devastating Fallout: Report.

Second Wave Follows Summer Workforce Reductions

In July, Microsoft initiated sweeping workforce reductions across the Xbox business that initially affected 1,600 positions, with an additional 1,600 job cuts planned by the conclusion of Microsoft’s business year. Microsoft has not yet officially confirmed the remaining roles designated for elimination, though Diablo and Warcraft maker Blizzard was notably largely unaffected during the initial wave.

The initial round of layoffs heavily impacted several veteran teams. Hundreds of staff members were let go at The Elder Scrolls Online developer ZeniMax Online, alongside approximately 100 job cuts at Doom creator Id Software. 'Clarity is Kindness': Xbox CEO Asha Sharma Uses Brutal Honesty to Navigate Business Overhaul, Layoffs.

CEO Asha Sharma's Strategic Overhaul

The restructuring aligns with a broader plan by CEO Asha Sharma to return Xbox to sustainable growth and "reset" its operations. Sharma previously addressed the division's challenges at the Bloomberg Tech conference this summer, stating that she planned on “resetting the business,” which was “not in a healthy spot”.

As part of this shift, Xbox has severed ties with multiple subsidiary studios:

• Compulsion Games and Double Fine Productions have repurchased their equity to return to operating as fully independent studios.

• Ninja Theory and Undead Labs have entered terms to join new external ownership.

The divestments represent a marked pivot toward focusing internal capital on core established intellectual properties while trimming middle-tier studio commitments.

Ongoing Contraction Across Microsoft Gaming

The anticipated dismissals represent the latest in a multi-year series of contractions across Microsoft's entertainment units. They arrive roughly a year after Microsoft carried out 9,000 corporate job cuts that severely impacted the Xbox division, leading to the cancellation of high-profile initiatives including the Perfect Dark reboot and Rare’s Everwild.

Microsoft also enacted significant staff reductions throughout 2023 and 2024, including the dismissal of 1,900 employees across Activision Blizzard, Bethesda, and Xbox shortly after closing its mega-acquisition of Activision. The latest round of consolidations signals continued pressure to realign headcount and improve operational margins across its gaming portfolio.

(The above story first appeared on LatestLY on Sep 22, 2026 03:26 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).