Microsoft's Xbox reset hits three-quarter mark with 268 more cuts, four studios divested

Microsoft is eliminating 268 roles across Halo Studios, other first-party studios and the Xbox Game Studios management and central functions layer.

The cuts were detailed in an update published on Sept. 22. Actions completed since July, inclusive of studio divestitures, bring the company roughly three-quarters of the way through its previously announced Xbox restructuring, according to that update The Verge.

The latest reduction is narrow compared with earlier phases. Microsoft previously confirmed 3,200 roles would be impacted over the course of its 2027 financial year ending in June 2027. About 1,600 Xbox employees were impacted by layoffs in July, leaving the September tranche as a smaller, more targeted pass focused on first-party development and central publishing oversight.

Studio divestitures are doing much of the structural work. Microsoft is selling off four Xbox studios as part of the restructuring. Double Fine and Compulsion Games have already gone independent from Xbox. Undead Labs has successfully transitioned to independent on similar terms to Compulsion Games and Double Fine.

That structure matters for people who run studios for a living. A sale or spin-out preserves teams, toolchains and live games under a new owner. A closure does not. Microsoft is using both mechanisms, which explains why headcount and studio count are moving on different tracks.

Ninja Theory sits in the second category for now. Two separate agreements to sell the studio fell through. Microsoft will begin consultation with employees on a proposed closure of Ninja Theory while continuing to explore other paths forward including finding another buyer.

Ninja Theory is the studio behind the Hellblade series. Its future has been uncertain since June, when The Verge reported, citing a source, that Xbox was closing the studio and that staff had been told on a call on Monday The Verge. The September update supersedes that earlier account. Closure is now framed as a proposal subject to consultation, with a sale still possible.

Consultation over the future of Arkane and the Blade game remains underway in accordance with French labor laws and is expected to continue through the end of the year. The timeline is procedural, not discretionary. French process requires extended employee consultation before structural decisions take effect, which puts Arkane on a slower clock than the UK and US teams.

The reset is being led by Asha Sharma, the new CEO overseeing an overhaul of Microsoft's Xbox division. In June 2026, the division was planning major job cuts for the following month, alongside significant cuts to marketing and other budgets as part of that overhaul Bloomberg.

The Xbox cuts sit inside a larger reduction. Microsoft's cut of 4,800 jobs accounts for about 2.1% of its global workforce Reuters. The Xbox portion, at 3,200 jobs, accounts for around 20% of its Xbox staff Bloomberg. The contrast is stark. A low-single-digit cut for the parent, a one-fifth reduction for the games organization.

The broader context here is portfolio shape rather than headcount alone. Cutting central XGS management while spinning out three mid-sized studios points to a thinner central layer and fewer wholly owned bets. For developers, that usually means shorter approval chains but less internal cushion when a project slips. For players, the near-term catalog changes little, because shipped games keep running and independent successors can continue their franchises.

In my view, the open question is what Microsoft keeps central by choice. Halo Studios remains inside, as do other first-party teams. Retaining flagship IP and core technology while letting single-team studios operate independently is a familiar way to control costs without exiting creative genres entirely. Worth flagging is the risk that failed sales turn into closures by default, as Ninja Theory illustrates. Finding a buyer for a narrative-driven studio with high production values and uneven commercial scale is harder than selling a live-service operation with recurring revenue.

The long arc still favors more games reaching more people, just through a leaner structure. Independent Double Fine, Compulsion and Undead Labs can hire, partner and publish without fitting a platform holder's annual plan. If Arkane finds a path through consultation and Ninja Theory finds a buyer, the restructuring will have preserved more creative capacity than the job-loss total suggests. If not, the industry absorbs experienced teams quickly. Talent of that caliber rarely stays idle for long.