Xbox reportedly planning second round of layoffs and studio consolidation

Xbox is reportedly preparing a second round of layoffs this week, according to The Information. The company plans to "consolidate several of its game studios" as part of ongoing restructuring that may involve mergers or internal changes across Xbox Game Studios, Bethesda, Activision, and Blizzard.

This follows Xbox's initial announcement in July to lay off 3,200 employees. The first round resulted in 1,600 redundancies, hitting teams at Obsidian, Bethesda, Id Software, and Zenimax Online Studios. Xbox also divested five internal studios: Compulsion Games, Double Fine Productions, Ninja Theory, Undead Labs, and Arkane. Compulsion Games and Double Fine became independent, while Ninja Theory and Undead Labs are being acquired. Arkane Lyon entered a consultation process.

Xbox CEO Asha Sharma attributed the restructuring to overexpansion. "In order to grow, we made a bunch of bets. As we did that, we inherently didn't focus on the core business," Sharma said. "The number one measure of your strategy is what you put your resources behind, and we simply spread ourselves too thin."

Sharma noted that platform teams had grown 40% since the current hardware generation began, while player base and overall play time declined. She outlined plans to reduce management layers to five, addressing concerns that some teams had grown to 14 layers. "As Xbox grew our headcount, we became more fragmented," Sharma explained. "Teams, studios, and functions often operate independently, and it became harder to work towards a shared goal, make the right tradeoffs, and get things done."

Sharma emphasized that the changes aim toward growth rather than contraction. "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," she said, adding that Xbox targets returning to growth in 2027.