Xbox is cutting 3,200 jobs and selling off four studios in what its CEO calls the most significant restructure in company history

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Xbox CEO Asha Sharma announced this week that the division will cut approximately 3,200 roles over the next fiscal year, about 20 percent of headcount, with 1,600 eliminations taking effect immediately and the rest phased in through FY27. Four studios, Compulsion Games, Double Fine Productions, Ninja Theory and Undead Labs, are being spun out or sold, while Arkane Lyon enters formal consultation in France over its own future

The memo Sharma sent staff was unusually blunt about why. She wrote that Xbox's business is not healthy, running at margins 3 to 10 times lower than comparable platform and publishing businesses, and that platform teams grew 40 percent larger than at the start of this console generation even as the player base and playtime both declined. The plan is to cut management layers down to a maximum of five, and three where possible

The strategic pivot is as notable as the cuts themselves. Sharma says content spend will hold roughly steady at last year's record level but get reallocated, with Minecraft and a revived Elder Scrolls push named as priority growth areas, and an insider tells Variety that Minecraft developer Mojang has effectively been used as a funding source for other studios without getting the investment it needed itself. No first party announced games are being cancelled, though Ninja Theory and Undead Labs are being sent off with funding specifically earmarked to finish Senua and State of Decay 3

The context matters too, this follows Microsoft's broader 4,800 job cuts announced the same day, and lands almost exactly a year after a previous wave that shut down The Initiative and cancelled Everwild. Sharma explicitly says the company overexpanded its studio portfolio since 2018, losing 64 cents for every dollar invested in a typical year, and is now trying to become a platform that supports independent creators with tools rather than owning every studio outright

So the discussion. Is admitting the business is unhealthy and overextended this openly a genuinely promising sign of a CEO willing to fix real structural problems, or does a cut this deep, touching every studio simultaneously, suggest the damage from years of acquisition strategy is now too broad to contain gracefully? And does refocusing on Minecraft and Elder Scrolls specifically feel like the right bet, or a retreat to safety that avoids the harder question of why the newer acquisitions never paid off?

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