Microsoft cuts 268 Xbox jobs, restructures studios in major reset

Microsoft cut 268 jobs across its gaming division this week as part of what Xbox chief Asha Sharma has described as the "most significant restructure in Xbox history." The layoffs involved studio reorganizations, franchise relocations, and management restructuring that has left Xbox employees uncertain about the platform's direction.

The scale of change is evident in how Xbox's core first-party structure has been dismantled. Halo Studios, once central to Xbox's identity, saw most of its team laid off. A shell team remains to support existing games like Halo Infinite and Halo: Campaign Evolved, but the next mainline Halo title was years away from release and has been cancelled. Some Halo Studios employees learned of layoffs through a public Xbox blog announcement before individual notifications arrived hours later.

Multiple studios have been reassigned under Activision's control, including 343 Industries (Halo), World's Edge (Age of Empires), and Rare (Sea of Thieves). Playground Games and Turn 10 Studios are merging into a single Forza studio, while Obsidian Entertainment has been moved from Xbox Game Studios under Bethesda Game Studios to work on a new Fallout entry. The Coalition and inXile Entertainment remain under Xbox Game Studios for now, but sources suggest they could face layoffs after their current projects ship.

The restructuring has sparked criticism from departing employees. Shannon Loftis, who spent nearly 30 years at Microsoft working on franchises including Fable and Project Gotham Racing, criticized the approach on Threads: "Xbox has become a business best described as 'squandered.' They're squandered everything: talent, IP, time, money, gamers, community, goodwill, brand equity, stable services, profitable, knowledge." Josh Daniels, former cinematic director at Halo Studios, noted being "promoted and laid off in the same week." Some employees expressed relief at departing after sustained turmoil.

The layoffs are part of a broader pattern. Microsoft began cutting thousands of gaming employees in early 2024 and has continued cutting since. Industry analyst Mat Piscatella commented: "These aren't cuts a serious business makes, in my opinion."

Xbox hardware remains under pressure while Game Pass continues undergoing constant revision. Microsoft has repeatedly added and removed Call of Duty from the service, shifted pricing, and reversed cloud access policies. The company lost $300 million in Call of Duty sales due to its addition to Game Pass, prompting a quick reversal on bringing new franchise entries to the subscription service. Multiple sources indicate Microsoft is working on overhauling Game Pass with ad-supported tiers, exclusion of day-one games from base tiers, cloud gaming add-ons, and a family plan option.

With fewer first-party studios making day-one games for Game Pass and the platform's core structure fragmented across Activision and Bethesda, the future of Xbox as a unified platform remains uncertain. Some observers suggest the restructuring could be designed to make Xbox easier to operate as a wholly owned subsidiary or to separate entirely.