Xbox parts ways with five studios as 1,600 jobs go

Microsoft has set out the scope of its Xbox restructuring, parting ways with five of the division’s best-known studios and beginning a round of layoffs that will total around 3,200 roles over its next financial year, Rock Paper Shotgun reported on 6 July.

Xbox gaming division chief executive Asha Sharma announced the job cuts, which began with roughly 1,600 redundancies on the day of the announcement and are to continue with a further 1,600 across the financial year. Rock Paper Shotgun described the move as the latest in a series of restructurings at the division following an acquisition spree dating back to the 2010s.

Where the five studios go

• Double Fine, the Psychonauts developer, returns to independence with some funding from Microsoft and keeps ownership of its games.
• Compulsion Games, the South of Midnight developer, also returns to independence.
• Ninja Theory, the Senua developer, has been sold to an unnamed new owner.
• Undead Labs, the State of Decay developer, has also been sold to an unnamed new owner.
• Arkane, developer of Dishonored and Marvel's Blade, remains in negotiation over its future.

No outright studio closures had been announced as part of the restructuring at the time of the reports.

Arkane's position is still unresolved

Of the five, only Arkane’s destination remained open. Rock Paper Shotgun reported that the studio’s management was in discussions with a works council of employees over a set of "strategic options", with no outcome announced. In a follow-up published the day after the announcement, the site noted that while the other four studios had either regained independence or found new owners, Arkane’s staff were still negotiating their own position.

Details beyond the broad strokes were limited at the time of the reports. The figure of around 3,200 covers Microsoft’s next financial year as a whole rather than a single round of cuts, and the second tranche of roughly 1,600 roles was not broken down by studio or team.

Both reports date from early July 2026: the announcement itself was covered on 6 July, and the follow-up on Arkane on 7 July.