Microsoft has announced a major restructuring of its Xbox gaming division, introducing thousands of job cuts and significant changes to several first-party studios. In an internal memo leaked by the CEO of Xbox Asha Sharma, it has been said that Microsoft plans to lay off about 3,200 employees in FY27.
It is said to be one of the biggest changes ever made by the Xbox gaming division and is intended to streamline operations and profitability.
Microsoft is Witnessing Major Layoffs in Xbox Division
As mentioned in the internal memo, Sharma claims that Xbox has had difficulties with selling hardware and has had lesser margins compared to other firms.
It was said that despite all the investments made on games, hardware, Game Pass, and multiplatforms, the company has not succeeded in generating expected revenues. It was also added that Xbox has been operating with higher costs and a fewer number of users for their consoles than the other players in the market.
As per the memo, these factors have made restructuring essential.
This is an important email I sent today to all employees at XBOX: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…
— ASHA (@asha_shar) July 6, 2026Studio Spinoffs and Divestments
In terms of restructuring, Microsoft announced that it is going to restructure some of its game studios as well.
The studio Compulsion Games and Double Fine Productions will supposedly get back to operating independently but still retain ownership of their intellectual property.
Ninja Theory and Undead Labs, on the other hand, will go through changing ownerships. As stated in the memo, funding has been raised for both companies to finish working on their Senua and State of Decay 3 projects.
Finally, according to the memo, Arkane is entering a process of consultation regarding further strategy.
Microsoft has also been working towards streamlining the management system of Xbox by minimizing the layers of leadership within the organization. In this regard, Microsoft recently announced that Helen Chiang has been appointed as the Chief Operating Officer for the company.
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