Microsoft has axed another 268 Xbox jobs as part of its sweeping gaming reset, just days before CEO Satya Nadella described the division's ongoing 'streamlining' as 'great to see'.
The latest cuts come on top of 1,600 roles eliminated earlier this year, with Microsoft still working towards a previously announced target of roughly 3,200 reductions. Microsoft says the latest actions bring the year-long restructuring roughly three-quarters of the way to completion.
Nadella Backs Xbox Restructuring
Microsoft's chief executive recently appeared on a lengthy episode of the Sources Podcast to address the latest phase of the Xbox division's ongoing restructuring plan, with his comments coming days after Microsoft announced another 268 job cuts across its gaming organisation.
Asha Sharma and her team's efforts to trim the division were described as 'great to see' by the executive. Nadella also said he feels 'fantastic' about Xbox's current studios and intellectual property, while stressing the need to develop a sustainable business model that can reach more players.
'There's some amount of streamlining the team is doing, and Asha is doing, which is great to see. And then we have to invent the right sustainable business model that allows us to deliver gaming to more and more people.'
The latest 268 cuts form part of Microsoft's previously announced plan to reduce Xbox headcount by approximately 3,200 during FY27, rather than representing a separate new target.
Xbox Reorganises Studios as Cuts Continue
The latest layoffs are only one part of the wider Xbox reset. Microsoft is also reorganising several of its first-party studios, with Activision expanding its remit to include Rare and World's Edge and taking responsibility for developing the next Halo title.
A new, purpose-built team at Activision will work on the next Halo game, while a smaller team at Halo Studios will continue supporting existing games and the Halo community. Bethesda is also expanding its remit to include Obsidian, while King will take on Microsoft Casual Games. Playground and Turn 10, meanwhile, are being brought together as one studio focused on Forza and Fable.
Microsoft also said two agreements involving Ninja Theory had fallen through and that consultation would begin with employees on a proposed closure, while consultation at Arkane remains underway. Compulsion Games, Double Fine and Undead Labs have meanwhile transitioned to new management arrangements.
Nadella Wants Xbox Back in Growth
Reflecting on Microsoft's history, the chief executive pointed out that gaming actually predated Windows within the company, tracing its roots all the way back to Flight Sim. Nadella described gaming as part of Microsoft's 'core DNA' alongside developer tools and knowledge work, while expressing confidence in the company's current intellectual property, studios and ability to deliver new games.
'I always say at Microsoft, we've had gaming, in fact, I think we've had gaming even before, as a category, before Windows. That's right, Flight Sim. And so, to me, it's in the same core DNA, like developer tools and knowledge work. And I feel fantastic about the IP we have right now, which is, if I look at the studios, the IP portfolio we have, and our ability to then take that and produce great games going forward, I feel fantastic.'
Praising the ongoing downsizing managed by Asha Sharma and her colleagues, he stressed the importance of building a viable business model to expand their audience. The stated ambition is for Xbox to operate as a 'great publisher' and 'great platform provider' across both PCs and Xbox consoles, with Sharma's team saying the business will return to growth in the next fiscal year while continuing to produce great games.
'That has always been the goal, which is we want to be a great publisher and a great platform provider for games across both PCs and Xboxes. And so that is sort of our goal. And I think Asha and team have said that Xbox is going to get back to growth this next fiscal year. And that's the plan they're executing on, and, in that process, do a bang-up job of producing some great games.'
The turnaround follows Sharma's July announcement of what she described as the most significant restructure in Xbox history. At the time, she said the business was not healthy and announced plans to reduce the team by approximately 3,200 during FY27.
Nadella had also previously said Microsoft needed a sustainable business model for gaming after years of investment.
Xbox Sets Its Sights on a Billion Daily Users
The challenge gets even steeper when factoring in Sharma's ambition for Xbox to entertain more than a billion people each day. The ambition comes against the backdrop of Microsoft's previously reported 500 million monthly active users across platforms and devices.
The two figures should not be treated as a direct doubling target, however, because one refers to monthly active users while the other describes a daily entertainment ambition. Sharma's July reset statement said: 'I want XBOX to be one of the few companies that entertains more than a billion people each day and gives everyone the opportunity to create and connect.'
The ambition comes as Xbox simultaneously reduces headcount and consolidates its studio structure, making the planned return to growth one of the biggest tests of the reset.
The division is also facing pressure from the hardware market. In June, Xbox said it was dealing with a hardware component crisis, with rising component costs contributing to its inability to make as many consoles as players wanted to buy. That adds another challenge as Microsoft attempts to simplify the organisation, focus investment and expand the Xbox audience.
For now, Microsoft's strategy is clear: a smaller, more consolidated Xbox organisation, a tighter studio structure and a renewed push for growth. The company says the reset is roughly three-quarters complete, leaving the next phase focused on whether its revamped business can deliver the growth Nadella and Sharma have promised.
