The biggest restructuring in Xbox history is underway: 1,600 roles are being eliminated immediately, while roughly 3,200 jobs are expected to disappear by the end of FY27.

After days of increasingly serious reports, Xbox has officially confirmed a major wave of layoffs. Xbox CEO Asha Sharma informed employees that around 1,600 roles will be eliminated on July 6, with the company planning to reduce its gaming workforce by approximately 3,200 positions by the end of fiscal year 2027.

This is not presented as a one-off cost-cutting measure, but as a lengthy overhaul of the Xbox business. Sharma said the company’s current position is not sustainable, with platform and publishing margins far below those of comparable businesses. Xbox’s bets on Game Pass, multiplatform releases, and a larger studio network have created value, but have not grown at the pace Microsoft expected.

“We are beginning the most significant restructure in Xbox history,” Sharma wrote in her memo to staff. “Today’s decisions do not reflect their talent or dedication.” She also made it clear that the process will extend throughout FY27, meaning further job reductions are expected after the initial round of layoffs.

The restructuring will also fundamentally change Xbox’s studio organization. Compulsion Games and Double Fine Productions are set to become independent again, while Ninja Theory, the studio behind Hellblade, and State of Decay developer Undead Labs are moving to new ownership. Xbox is expected to provide transitional funding to all four teams so they can complete ongoing development and continue work on their current projects.

Sharma stressed that no publicly announced first-party games are being cancelled as part of these cuts. Xbox intends to operate with fewer management layers, simpler internal processes, reduced external vendor spending, and a more focused content strategy. Mojang, the team behind Minecraft, and King, the developer of Candy Crush, will report directly to Sharma, while Helen Chiang takes on the newly created Chief Operating Officer role overseeing content, hardware, platform, and services.

Microsoft’s gaming division has now reached another deeply painful turning point. The company spent recent years building a huge studio portfolio through acquisitions, but the latest decisions show that Xbox is shifting its attention toward its largest franchises, tighter spending controls, and a more profitable long-term operating model.

Source: Tech4Gamers