"Our business today is not healthy." That's how Xbox CEO Asha Sharma phrased one of the opening paragraphs in the Xbox Wire blog post that just landed and finally answered many of the major questions we had in regards to the state of Xbox in the immediate future and years to come.
Sharma explains that Xbox is "operating at margins that are 3-10x lower than comparable platform and publishing businesses" while losing "64 cents for every dollar we invested", and that this combined with a brutal hardware crisis all means that "we must reset Xbox". But what does this mean for the folk employed at Microsoft's gaming division?
The article explains that in total 3,200 employees are being laid off from Xbox throughout fiscal year 2027. Around 1,600 jobs are being cut today, with the rest to follow over the next 12 months, where part of the aim is to cut entire chunks out of the leadership hierarchy, reducing the layers of management from an absurd 14 layers in places to at most five layers and with an aim for three layers.
Likewise, studios are being affected, but Xbox has managed to find a solution that will seemingly be in the best interest of those involved. For one, Compulsion Games (South of Midnight) and Double Fine Productions (Kiln, Keeper) are regaining their independence, allowing them to operate how and as they would like without being part of the wider Microsoft or Xbox Game Studios umbrella.
As for Ninja Theory (Senua) and Undead Labs (State of Decay 3), these two teams have now "entered terms to join new ownership with funding to complete and grow Senua and State of Decay 3."
The big catch seems to be Arkane, as despite Jerk Gustafsson joining the developer as its new CEO, the company is "beginning required consultation with its Works Council to review potential strategic options."
Otherwise, Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios are all seeing changes in size and a focus on "higher priority projects", while Mojang and King are now expected to report directly to Sharma.
The article then explains that "none of our first party publicly announced games or projects are being cancelled as part of these reductions."
Sharma then notes the aim will be to operate under one model and to ensure it delivers "clear investment decisions, learn from our successes and failures, and hold ourselves accountable for results."
All of this comes as Sharma is preparing Xbox for years and years to come, signing off with: "These changes are about a bigger future for XBOX, not a smaller one. The next decade of gaming will be larger, more global, and more creative than anything we've seen before. This year, we'll invest as much in XBOX as we ever have, but we'll invest with greater focus, greater discipline, and greater clarity, all in service of making XBOX where the world plays and creates."