Microsoft is cutting hundreds more jobs across its Xbox gaming division this week as the company restructures its studios, shifts major franchises between teams and reduces its investment in parts of its game-development business. The news was first reported by The Information on Tuesday, 22 September.
The latest cuts come only months after Microsoft announced thousands of layoffs at Xbox, raising fresh questions about why game developers are facing another round of job losses. The new report indicated that the company plans to eliminate 268 additional positions and will include employees at Halo Studios and other first-party studios.
Microsoft, which owns Xbox as well as major gaming businesses including Bethesda, Activision and Blizzard, generated more than $100 billion in net income in its latest full fiscal year last year.
The new cuts add to a much larger restructuring that Microsoft announced in July. At the time, Xbox said approximately 3,200 positions would be eliminated during fiscal 2027, including about 1,600 immediate job cuts.
Why Is Microsoft Cutting Xbox Jobs Again?
The latest layoffs are part of Microsoft's broader attempt to restructure Xbox after years of heavy investment in game studios, Game Pass and new gaming platforms.
In a July message to employees, Xbox CEO Asha Sharma said the gaming business was not performing at the level Microsoft expected. She said Xbox's margins were three to 10 times lower than comparable platform and publishing businesses.
"Our business today is not healthy," Sharma wrote in an email announcing the layoffs at the time. "We are operating at margins that are 3-10x lower than comparable platform and publishing businesses."
Sharma also said Microsoft's investments in Game Pass, multiplatform releases and a broader portfolio of content had created value but had not grown as quickly as expected.
As a result, Microsoft said it needed to reduce costs and focus its gaming operation around fewer priorities.
The company previously built a large portfolio of game developers through acquisitions, including Bethesda and Activision Blizzard. It is now moving in the opposite direction in some parts of the business.
In July, Xbox said Compulsion Games and Double Fine Productions would become independent studios, while Ninja Theory and Undead Labs were set to move toward new ownership. Arkane's management in France also began consultations over possible strategic options.
Xbox said it had learned that it was not necessarily the right owner for every type of studio. Sharma also said that, in a typical year, Xbox lost 64 cents for every dollar invested in its studio portfolio.
That prompted Microsoft to reconsider which studios it wants to own and where it wants to put development money.
How Many Xbox Employees Have Lost Their Jobs?
Around 1,600 employees were included in the initial round of cuts announced 6 July. Microsoft said another 1,600 reductions would follow during the fiscal year. The additional 268 layoffs announced in September bring the number of affected roles publicly identified through Microsoft's restructuring to roughly 1,900, although the broader plan remains larger.
Microsoft's overall July announcement involved approximately 4,800 job cuts across the company, with Xbox among the businesses most heavily affected.
Why Are Major Franchises Moving to Activision?
The restructuring is also changing who is responsible for some of Xbox's biggest franchises.
Microsoft said Activision will take on development responsibilities for franchises including Halo, Sea of Thieves and Age of Empires. Halo Studios will continue maintaining existing titles, while a dedicated Activision team will work on the next major Halo game, according to The Verge. Other studios are also being reorganised.
Obsidian is being aligned more closely with Bethesda as Microsoft focuses on Fallout, while Turn 10 Studios and Playground Games are being combined around projects including Forza and Fable.
The changes reflect Microsoft's broader push to concentrate resources around established franchises rather than maintain a large number of separate studio structures.
Is AI Responsible for the Xbox Layoffs?
AI is part of the broader discussion surrounding technology industry layoffs, but Microsoft has not said that AI is the direct reason for the latest Xbox cuts.
The company's official explanation has centred on restructuring, reducing organisational complexity, changing its studio portfolio and reallocating investment.
Microsoft has said its gaming organisation had accumulated too many management layers and had become fragmented as its workforce and studio portfolio expanded.
In its July restructuring announcement, Xbox said some parts of the organisation had as many as 14 layers of management and that platform teams had grown 40% larger since the beginning of the current console generation, even as its player base and playtime had declined.
The company said it wanted to reduce management layers and create a flatter organisation.
Why Are Game Developers Facing Repeated Layoffs?
The Xbox cuts are part of a much larger employment crisis that has affected the video game industry in recent years.
Game development has become increasingly expensive, particularly for large AAA titles that can require hundreds of employees and years of production.
At the same time, publishers are dealing with changing player habits, longer development cycles, subscription services, live-service competition and pressure to generate predictable returns on increasingly expensive projects.
Xbox is also dealing with the consequences of having built a much larger studio portfolio over several years. Microsoft's July announcement explicitly acknowledged that its gaming business had accumulated more teams and investment while some of its major bets did not grow as expected.
That combination has contributed to repeated restructurings across the industry.
