Microsoft layoffs Xbox are set to begin on July 6, with the company preparing a wave of cuts across its Xbox studios and employees. The move could include studio closures and a canceled game, putting the division’s structure and several teams on immediate notice.
Microsoft is set to announce the layoffs next week. The scale could reach at least five studios, which would push the cuts beyond headcount alone and into the shape of Xbox’s internal roster.
Asha Sharma sets the reset
The layoffs sit inside a broader reset for the Xbox division under CEO Asha Sharma. Last month, she said the Xbox business isn’t healthy, and she said her mandate is not 30 percent accountability margins... it’s to be the number one gaming and entertainment company, and that’s what we’re going to do.
That line matters because it frames these cuts as operating discipline, not a one-off trim. Microsoft is now using layoffs, closures, and possible spin-offs to redraw how the division is organized, which is the kind of move employees usually feel first and customers only see later in delayed or canceled projects.
Blade, Arkane Studios, and closures
Blade is one of the clearest pressure points. Microsoft wants to cancel the game as part of the cost cuts and job losses planned for its Xbox gaming division, even though it was originally supposed to debut later this year and its internal ship date slipped to late 2027.
That delay gives Microsoft a practical excuse to revisit the project, but it also shows how far the game had drifted from its original schedule before the company moved toward cancellation. Blade was developed by Arkane Studios, and Microsoft is also exploring options to sell Arkane Studios.
Compulsion Games, Ninja Theory, and Undead Labs
Earlier this month, reported that Microsoft was trying to spin off Compulsion Games, Double Fine, and Ninja Theory. Compulsion Games has already started telling employees to look for jobs elsewhere, and Ninja Theory employees were informed earlier this month that Microsoft wants to close the UK-based studio or spin it off.
This week, GamesBeat reported that Microsoft is actively looking for a buyer for Undead Labs. If Microsoft closes five studios, at least 500 employees would be impacted before any wider cuts, and the rumors around at least 1,000 job losses suggest the final tally could go much further.
The one question that still matters most is which studios and employees will be included when Microsoft announces the cuts next week. For the people inside Xbox, July 6 is no longer a distant date; it is the point where the division’s reset starts to become concrete.
