Xbox's 2026 Layoffs, and What "Divesting a Studio" Actually Means
Xbox cut roughly 3,200 jobs and let go of four studios it had owned for years — not by shutting them down, but by handing them to someone else.
On July 6, 2026, Xbox's new CEO Asha Sharma told employees the division was starting what she called "the most significant restructure in Xbox history": up to 3,200 jobs cut over the following year, about a fifth of Xbox's workforce, with 1,600 of those cuts effective immediately. Four studios Xbox had owned outright — Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Labs — are leaving Microsoft's direct management as part of the same announcement.
"Divest" sounds like corporate softening for "get rid of," but it describes something more specific than a shutdown, and it's worth being precise about which one is actually happening. Compulsion Games and Double Fine are spinning back out as independent companies, keeping the rights to their own games, with Microsoft providing some transition funding to get each one's next project started. Ninja Theory and Undead Labs are moving to new ownership entirely — as of this writing, neither has a publicly named buyer. In every case, the studio itself keeps existing and keeps making games; only who signs the checks changes.
The scale here traces back to a much bigger acquisition: Microsoft's $68.7 billion purchase of Activision Blizzard closed in 2023, folding in studios and franchises far beyond what Xbox's existing structure was built to run efficiently. A reset this size is, in part, the bill for absorbing that much at once — trimming a portfolio that grew faster than the organization managing it.
The cuts landed alongside a broader, company-wide Microsoft reduction of about 4,800 jobs, roughly 2% of its global headcount, which puts the Xbox-specific numbers in context: this wasn't a gaming-only retrenchment, but gaming absorbed a disproportionate share of it. For anyone tracking the industry, it's also a concrete example of a pattern covered elsewhere in this category — as AAA budgets keep climbing, the cost of a portfolio not performing to plan keeps climbing right alongside it.
Source: Xbox Wire — "Resetting Xbox"