Xbox CEO Asha Sharma has called the division's current restructuring "the most significant restructure in Xbox history," confirming that 1,600 employees are being laid off this summer, with another 1,600 expected to lose their jobs over the following year The Verge.

The cuts were formalized in a post titled "Resetting Xbox," published to Xbox Wire on July 6, 2026 news.xbox.com. Bethesda, id Software, and Obsidian are also seeing staff reductions as part of the same restructuring, according to The Verge's reporting.

Four internal studios — Double Fine, Compulsion Games, Undead Labs, and Ninja Theory — are being spun out as independent developers rather than shut down outright. Remaining internal teams will consolidate around a shorter list of priority franchises: Halo, Gears of War, Minecraft, and Candy Crush.

Helen Chiang, who previously oversaw the Minecraft franchise, has been promoted to Xbox chief operating officer, reporting directly to Sharma. The elevation of a Minecraft executive to the COO role is notable given that Minecraft remains one of the four franchises the reorganized Xbox is explicitly prioritizing.

In her internal memo, Sharma set a stated ambition for Xbox to entertain more than a billion people every day. She also disclosed a specific financial rationale for the cuts: in a typical year, she said, Xbox lost 64 cents for every dollar it invested.

The scale of this reset did not emerge without warning. Bloomberg first reported on June 10, 2026 that Xbox was preparing significant layoffs under Sharma, who had recently taken the CEO role Bloomberg. Reuters, citing the same Bloomberg reporting, noted that the planned cuts would include significant reductions to marketing and other operating budgets Reuters.

Two days later, The Information reported that Microsoft had considered spinning Xbox off as a separate entity entirely, per Reuters' account of that reporting Reuters. Xbox's July 6 announcement did not pursue that path, opting instead for internal consolidation alongside external studio spinouts.

The Xbox cuts sit inside a much larger wave of Microsoft layoffs. Reuters reported on June 30 that Microsoft's job reductions that month affected under 2.5 percent of its total workforce, touching thousands of roles across sales, consulting, and gaming Reuters. On July 6, the same day as the Xbox Wire post, Microsoft announced a further 4,800 job cuts, which Reuters characterized as part of an industry-wide, AI-driven layoff wave Reuters. That same Reuters report noted Microsoft's shares had fallen nearly 23 percent over the first six months of 2026.

Taken together, the sequence of disclosures — Bloomberg's initial report on June 10, the spinoff speculation on June 12, the broader workforce cuts confirmed June 30, and the formal Xbox restructuring and fresh Microsoft layoffs both landing on July 6 — describes a company reshaping its gaming division under sustained financial pressure rather than executing a single, isolated decision.

The 64-cents-per-dollar figure Sharma cited is the closest thing to a hard financial justification made public so far, and it invites scrutiny that Sharma's memo itself does not resolve: whether that loss ratio reflects the cost of first-party studio acquisitions made under previous Xbox leadership, Game Pass subscriber economics, or hardware subsidization, or some combination of the three. Xbox has not broken out that figure by business line.

Sharma's billion-daily-users framing is worth flagging as an ambition rather than a metric Xbox has published a methodology for. It echoes platform-scale language more commonly associated with social and mobile products than console gaming, and its inclusion in the same memo announcing 3,200 layoffs suggests Xbox's leadership is now measuring itself against reach rather than unit sales or subscriber counts alone.

The decision to spin out four studios rather than close them mirrors a pattern independent developers have pushed for since major platform holders began large-scale first-party acquisitions in the previous console generation: retaining IP relationships while shedding balance-sheet exposure. Whether Double Fine, Compulsion, Undead Labs, and Ninja Theory can sustain themselves as standalone studios, with or without continued publishing ties to Xbox, is the open question their spinout leaves unanswered.

Chiang's promotion to COO, paired with Minecraft's inclusion among the four prioritized franchises, points toward a leadership structure now built around Xbox's most durable live-service and cross-platform properties rather than around exclusive console titles as the primary growth lever. That shift, if it holds, would mark a departure from the platform-exclusivity strategy Xbox pursued through much of the last decade.