With Microsoft in charge, the Sword of Damocles is about to fall again. It’s unclear who will end up in the graveyard this time.
Double Fine? Or Compulsion Games? Microsoft might shut down one of them. However, it’s also possible that Obsidian is the studio that should be worried about layoffs. According to a reliable source, Xbox Game Studios are uncertain about their future under Asha Sharma’s leadership. Last week, Xbox’s CEO released an internal letter addressing the next 100 days for Xbox and the reset that will take place during that period. While the letter made promises to fans, it also revealed Xbox’s 3% margin of safety and other alarming indicators of its business situation. Sharma did not mention layoffs at Xbox, but this has become the subject of speculation online.
Apparently, MS studios who had been told in the past that layoffs wouldn’t affect them are getting a different message now after the recent announcements – formerly “safe” studios now are telling employees they aren’t sure how the management changes will impact the studio. Lot of…
– Chris Avellone (@ChrisAvellone) June 14, 2026
“Microsoft’s studios, which were previously told that layoffs wouldn’t affect them, are receiving a different message after the recent announcements – formerly ‘safe’ studios are now telling their employees that they are unsure how the management changes will impact their studios,” wrote Obsidian co-founder Chris Avellone on Twitter.
Avellone isn’t sure if there will be layoffs at Obsidian Entertainment. However, based on his connections, it’s reasonable to assume he’s referring to Obsidian. Last year, Obsidian released Avowed and The Outer Worlds 2. They also have an Xbox hit, Grounded, and Grounded 2 is currently in development. There are other claims and speculations about the layoffs. However, if even the insiders themselves aren’t sure, then it’s possible that they might not actually happen.
Whatever happens, Microsoft’s fiscal year begins in July, and that’s when it will once again lay off an unknown number of people. One thing is certain: this won’t be a minor round of layoffs.
Source: Reddit
