We knew it was coming, as Microsoft’s new fiscal year started on July 1st. Xbox has begun what leadership is calling the most significant restructuring to date in the Xbox division. Sweeping changes to studios, platforms, teams, and operations. This begins with 3,200 laid off during the FY 2027, with 1,600 of those now impacted. Four studios will also transition from Microsoft to independent ownership and management.
Leadership does acknowledge, for what it’s worth, that the impact on employees is not a reflection of talent but instead a business model that has become financially unstable. Xbox says its margins are 3-10x lower than those of its competing platforms and publishing businesses, due to an industry-wide downturn.
Xbox will begin shifting its focus from studio ownership to independent developers. Compulsion Games and Double Fine Productions are becoming independent; Ninja Theory and Undead Labs are moving to new ownership, for example. Additional cuts across Activision, Bethesda, King, Mojang, and Xbox Studios will also come, though no first-party games have been canceled. Xbox will clean up its codebase and unify services to reduce vendor spending by up to 50 percent.
Xbox has created a new position, Chief Operating Officer, who has full responsibility over content, platform, and services. Helen Chiang, a longtime leader, will take over that role. Xbox says these cuts and restructuring are designed for a bigger future, not a smaller one, with equal investments to previous years, just a more focused investment. Xbox leadership expects to return to growth in 2027.
