Microsoft has announced the biggest restructuring in Xbox history. The company plans to cut about 3,200 jobs during FY27. Xbox CEO Asha shared the news in an internal email to employees, which she later posted on X. She said the restructuring will begin with about 1,600 job cuts right away, with more layoffs expected later. Asha also announced that four Xbox game studios will come under new management as part of the changes. The company says these steps are meant to improve its business and future plans. Here is everything you need to know about the Xbox layoffs, the job cuts, and the management changes.
Asha, Xbox CEO, recently took to the social media platform X, where she shared an internal email she sent to the Xbox employees. In the mail she stated that Xbox is going through a difficult but necessary change as the gaming business is facing challenges due to lower margins, increasing costs, and changes in the industry.
This is an important email I sent today to all employees at XBOX:
— ASHA (@asha_shar) July 6, 2026
Team,
We are beginning the most significant restructure in XBOX history. After careful consideration, I've made the difficult decision to reduce our team by approximately 3,200 throughout FY27. This will include…
She stated that while the company has expanded its studio portfolio aggressively since 2018, the gaming market has become more competitive with both large publishers and smaller independent studios releasing more titles.
Microsoft also said that the latest changes are aimed at creating a more focused Xbox business. The company plans to reduce complexity, improve decision-making, and bring more accountability across teams.
Also read: YouTube cannot proactively track or block unauthorised court hearing videos, says Google
Compulsion Games and Double Fine Productions will become independent studios again as a part of the restructuring. Both the entities confirmed the same via an X post. The companies are said to retain their existing game properties, catalogues, and support for upcoming projects.
An important update from Compulsion Games. pic.twitter.com/V4yRkpshuk
— Compulsion Games (@CompulsionGames) July 6, 2026
— Double Fine (@DoubleFine) July 6, 2026
Ninja Theory and Undead Labs have also entered agreements to join new ownership structures with funding support for future projects, including Senua and State of Decay 3. Arkane’s team in France will also review possible strategic options through the required consultation process.
Microsoft also clarified that no publicly announced first-party games or projects will be cancelled or affected due to the restructuring changes.
Aside from the changes at the Xbox, Microsoft also confirmed that they will carry forward with wider layoffs that would affect around 4,800 employees. This is nearly around 2.1 per cent of Microsoft’s global workforce. The reductions are said to mainly affect the Microsoft Commercial and Xbox teams, with more operational changes expected in the future.
Microsoft Chief People Officer Amy Coleman said that the company is adjusting its workforce to focus on important priorities in a changing industry. She added that the job cuts are not being replaced by AI but accepted that AI is changing how employees work by automating some daily tasks.\
Also read: India mulling AI law to tackle deepfakes, cyber attacks and accountability gaps
Xbox will also reduce management layers and change how teams work internally. Mojang and King will now directly report to Asha, while Helen Chiang has been promoted to Chief Operating Officer for Xbox. Microsoft said these changes are designed to build a stronger future for Xbox, with the company aiming to return to growth in 2027.