Xbox is entering what CEO Asha Sharma is calling “the most significant restructure in XBOX history.” In a memo titled “Resetting Xbox,” published July 6 on Xbox Wire, Sharma confirmed the division will cut roughly 3,200 roles through fiscal year 2027, with about 1,600 eliminations effective immediately.

The reset also reshuffles Xbox’s studio portfolio. Double Fine and Compulsion Games are being spun off as independent studios, retaining their IP and catalogs along with funding to complete their next projects. Undead Labs and Ninja Theory are moving to new ownership as well, with backing in place to finish Senua’s Saga: Hellblade and State of Decay 3. Arkane Lyon’s situation remains unresolved — French labor law requires a formal Works Council review before Microsoft can finalize next steps there, including the fate of its in-development Blade project.

Sharma pointed to organizational bloat as part of the problem, noting that some decisions passed through as many as 14 layers of management before reaching developers. Going forward, she says management chains will be capped at five layers, and three where possible. Mojang and King — Xbox’s mobile-gaming assets from the Activision acquisition — will now report directly to Sharma, signaling a sharper mobile push.

This follows a rocky stretch for the division: a second Game Pass price hike in just over a year, a reported subscriber drop after that increase, and last July’s layoffs. Sharma, who took over Xbox leadership from Phil Spencer in February 2026, framed the cuts as a deliberate reset rather than a single, one-day bloodletting — with Xbox investing “with greater focus, greater discipline, and greater clarity” and targeting a return to growth in 2027.

Source: Xbox Wire