Xbox to Consolidate Studios in New Wave of Layoffs

Microsoft is preparing for a significant restructuring within its gaming division, with reports indicating that hundreds of additional jobs will be cut this week. This move marks a second major wave of staff reductions following the widespread layoffs enacted in July, which initially affected 1,600 employees across the Xbox business.

According to a report from The Information, cited by videogameschronicle.com, the company plans to consolidate several of its game studios. This strategy involves merging teams or moving staff between major publishing arms, including Xbox Game Studios, Bethesda, Activision, and Blizzard, in an effort to streamline operations.

Strategic shift under new leadership

The changes align with the strategy of Asha Sharma, who took over as CEO with a mandate to return Xbox to growth. Sharma has previously described the business as being in an unhealthy state and has initiated a reset that includes cutting ties with numerous owned studios. Compulsion Games and Double Fine Productions have already returned to independence, while Ninja Theory and Undead Labs are transitioning to new ownership.

Impact on key development teams

The previous wave of cuts saw hundreds of job losses at ZeniMax Online, the developer behind The Elder Scrolls Online, and approximately 100 cuts at Id Software. While Blizzard was largely unaffected in the first round, the current consolidation plans suggest that future changes may impact teams across the entire portfolio, including those under the Activision and Bethesda banners.

Continued financial pressures and trade-offs

These reductions come less than a year after Microsoft cut 9,000 jobs company-wide, a move that resulted in the cancellation of high-profile projects like the Perfect Dark reboot and Rare’s Everwild. The ongoing effort to reduce costs reflects a broader trade-off where short-term headcount stability is sacrificed for long-term financial discipline and operational efficiency.