Xbox’s Second Wave Of Planned Layoffs Is Reportedly Starting As Studios Face Major Restructuring

If true, then 2026 will mark a year of major changes for Xbox. Since Sharma stepped in to run the division, the goal has been to make it more profitable as part of a “reset” initiative that has seen scores of jobs slashed over the last couple of months.

Xbox has also seen several of its first-party studios depart from the organization, with Double Fine Productions and Compulsion Games becoming independent studios again. State of Decay 3 developer Undead Labs and Senua’s Blade studio Ninja Theory have also been sold off, while Arkane Lyon is also looking to divest itself from Microsoft once it finishes a mandatory consultation period with the French Local Works Council.

Xbox is now focused on its biggest franchises, with Bethesda recently confirming that Fallout 5 and remasters of Fallout 3 and Fallout: New Vegas are in the works. At the same time, various studios like id Software and Zenimax Online have been hit hard by layoffs, as part of Microsoft’s plans to shed approximately 20% of its Xbox workforce.