Microsoft Cuts 268 Xbox Jobs as Restructuring Passes 75% Mark

Microsoft is cutting 268 roles across Halo Studios, other first-party studios, meaning teams Microsoft owns that make games for Xbox, and the Xbox Game Studios management and central support layer.

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

The September reduction is smaller than earlier phases. Microsoft previously confirmed 3,200 roles would be affected during its 2027 financial year, which ends in June 2027. About 1,600 Xbox employees were affected by layoffs in July, leaving September as a smaller and more focused round centered on Xbox-owned game development and central publishing oversight.

The broader context at this stage is that studio sales are doing much of the restructuring work. Microsoft is selling off four Xbox studios as part of the plan. Double Fine and Compulsion Games have already become independent from Xbox. Undead Labs has become independent on similar terms to Compulsion Games and Double Fine.

To understand that difference, it helps to compare a sale with a closure. A sale or spin-out keeps teams, development tools and live games together under a new owner. A closure does not. Microsoft is using both methods, which is why staff totals and studio totals are moving on different tracks.

Ninja Theory falls in the second group 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 described 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 follows legal procedure. French process requires extended employee consultation before structural decisions take effect, which puts Arkane on a slower schedule than the UK and US teams.

The reset is being led by Asha Sharma, the new CEO overseeing the overhaul of Microsoft's Xbox division. In June 2026, the division was planning major job cuts for the following month, alongside large 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. That is a low-single-digit cut for the parent company compared with a one-fifth reduction for the games organization.

The broader context here is portfolio shape rather than headcount alone. Cutting central management while spinning out three mid-sized studios points to a thinner central layer and fewer fully owned bets. For developers, that usually means shorter approval chains but less internal support 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. Keeping flagship games and core technology while letting single-team studios operate independently is a familiar way to control costs without leaving creative genres entirely. Worth flagging is the risk that failed sales turn into closures by default, as Ninja Theory shows. Finding a buyer for a story-led studio with high production values and uneven commercial scale is harder than selling a live-service operation with recurring revenue.

Looking further ahead, 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.