Xbox to Cut 3,200 Jobs and Divest Four Studios in Overhaul

There is a specific sentence in Asha Sharma's memo to Xbox staff that makes everything else fall into place. 'Our business today is not healthy', the Xbox CEO reportedly told her people, then said the division has been operating at margins three to ten times lower than comparable platform and publishing businesses, and losing 64 cents for every dollar it invested in game studios. Read that as the justification for what Forbes reported is the most significant restructure in Xbox history.

The concrete moves are large. Roughly 3,200 jobs go across fiscal 2027, with about 1,600 of those cuts landing immediately, a hit that spans almost every part of the division from Activision and Bethesda to King, Mojang, Blizzard and Xbox Game Studios. Four studios exit Microsoft's ownership at the same time. Compulsion Games and Double Fine are being spun out as independents, and Ninja Theory and Undead Labs have entered terms to join new ownership with funding to complete and grow Senua and State of Decay 3. Arkane Lyon, currently making Marvel's Blade, is heading into French Works Council consultation on its options.

The org chart is being redrawn too. Helen Chiang, previously running Mojang, becomes a new COO with end-to-end P&L responsibility across content, hardware, platform and services as Dave McCarthy retires. Sharma says she wants management layers cut from as many as fourteen down to no more than five, and ideally three, according to Deadline's readout of the memo. She has only been in the CEO seat since February, after Phil Spencer's twelve-year run overseeing Xbox ended.

The honest caveats are that Sharma's numbers are internal framing rather than audited disclosures, so treat the 64-cents figure and the three-to-ten-times margin gap as reported, not settled. The reporting also does not name who is buying Ninja Theory or Undead Labs, or on what terms for the in-flight titles, does not tell you how Arkane Lyon's consultation will resolve, and does not attach funding numbers to the Compulsion or Double Fine spinouts.

The forward read is simple. If Sharma delivers on the promised return to growth in 2027, the winners are the four studios freed with their IP intact and a leaner Xbox with a single P&L owner instead of siloed leaders. If she does not, this is the moment when 'Xbox as a first-party powerhouse' quietly becomes 'Xbox as a distribution surface for whoever else will publish on it'.