Xbox Cuts: Microsoft axes 3,200 jobs, divests 5 studios

Microsoft decided to make a clean cut in its Xbox division, laying off a whopping 3,200 people. This move sends shivers through the industry, especially when the video game market seemed to be booming. Clearly, something wasn't adding up in Redmond's books.

This "restructuring" also includes parting ways with several development studios, a choice that leaves many fans scratching their heads. Bloomberg reported the news on July 6, 2026, indicating a massive shake-up. It's not the first time a tech giant has opted for such drastic decisions, is it?

Five development studios tied to Xbox are now forced to rethink their future. Compulsion Games and Double Fine Productions, for instance, won't be under Microsoft's wing anymore; they'll become independent studios. A swift kick in the pants, but maybe also an opportunity.

The situation is even more complex for Undead Labs and Ninja Theory, which will be outright sold to external buyers. And it doesn't stop there: Xbox is also considering selling or spinning out Arkane Studios, famous for titles like Dishonored. Basically, a real dismantling of parts of its development ecosystem.