Xbox announced a massive corporate restructuring on Monday, revealing plans to downsize its total workforce by 20% over the coming year. This aggressive pivot involves shedding four internal studios, with a potential fifth closure on the horizon. Double Fine and Compulsion Games are transitioning back to independent status, equipped with transitional funding from Microsoft and retaining ownership of their respective intellectual properties. Meanwhile, Undead Labs and Ninja Theory have been offloaded to undisclosed buyers. The status of Arkane Studios remains precarious, as Xbox leadership is currently evaluating the team’s “potential strategic options.”
The operational fate of the remaining studios under the Microsoft banner is less transparent. Of the 3,200 total job losses announced, only 350 are directly attributed to the four divested studios, excluding Arkane. In an official communication via Xbox Wire, CEO Asha Sharma noted that while layoffs will “vary in size” across the organization, no current projects have been canceled.
As the company initiates this hard reset, the long-term vision for the Xbox brand is beginning to take shape. While the specifics remain opaque, the roster of studios retained provides a clear window into which franchises will anchor the company’s future. Below is a breakdown of the current landscape, though it is worth noting that the exact scale of personnel cuts within these teams remains unconfirmed.
Xbox shutters 4 major studios in sweeping corporate reset
New CEO Asha Sharma outlines a radical strategy to revitalize the struggling gaming giant.
Activision
Given the staggering $75 billion acquisition of Activision Blizzard in 2023, the publisher remains a cornerstone of Xbox’s future. The division is heavily anchored by the Call of Duty franchise, with development responsibilities distributed across Infinity Ward, Raven Software, Treyarch, and Sledgehammer Games. The next installment, Call of Duty: Modern Warfare 4, is slated for an October 23 launch, though unlike its 2025 predecessor, it will not debut on Game Pass.
Blizzard
While the full extent of the layoffs within Blizzard is not yet public, internal memos suggest the publisher will not be exempt from the cuts. Currently, Blizzard manages several heavy-hitting IPs, including Overwatch, World of Warcraft, Hearthstone, and Diablo. With BlizzCon scheduled for mid-September, further clarity regarding the developer’s trajectory is expected soon.
King
The most significant organizational shift involves Candy Crush developer King, which will now report directly to CEO Asha Sharma, alongside Mojang. This realignment highlights the importance of mobile gaming in the new Xbox strategy. As Sharma stated in her memo, these teams represent the company’s largest user bases and are vital for geographic and demographic expansion.
Bethesda
Image: Virtuos, Bethesda Game Studios/Bethesda Softworks
Since its 2021 acquisition, Bethesda has become a primary pillar of the Xbox ecosystem. While the potential sale or closure of Arkane Studios is a major loss, other Bethesda teams remain operational, albeit with notable reductions. Reports indicate that id Software and ZeniMax Online Studios have experienced significant staff departures. However, with no game cancellations announced, it appears that work on The Elder Scrolls 6 continues unabated.
The Coalition
Xbox’s strategy is clearly shifting toward core, established franchises. The Coalition continues to lead the Gears of War series, with the highly anticipated Gears of War: E-Day serving as a key holiday release for the Xbox Series X on October 6.
Halo Studios
Halo remains at the heart of Microsoft’s portfolio. Halo Studios is currently focused on the upcoming Halo: Campaign Evolved remake, arriving July 28. Despite this, rumors suggest that a separate multiplayer project, codenamed “Project Ekur,” has been quietly shuttered, though official confirmation is still pending.
Mojang Studios
Image: Mojang/Xbox Game Studios
Minecraft remains a priority, with Minecraft Dungeons 2 set for a September 29 release. Mojang Studios has been elevated to report directly to leadership, with former VP Helen Chiang transitioning into the role of Xbox’s first Chief Operating Officer as part of this broader shift toward treating Minecraft as a major platform-level asset.
Obsidian Entertainment
Despite false reports suggesting imminent closure, Obsidian Entertainment remains firmly under the Xbox banner. While their current roadmap is less defined than other studios, their deep legacy with the Fallout IP—coupled with Xbox’s desire to revitalize that brand—makes them a studio to watch. While currently focused on Grounded 2 updates, it is widely speculated that the team may eventually return to the Fallout universe.
Playground Games
Image: Playground Games/Xbox Game Studios
Following the success of Forza Horizon 6 and with Fable on the horizon, Playground Games remains a vital asset. It is worth noting, however, that the studio is now the sole survivor of the 2018 expansion wave that once included Compulsion, Undead Labs, and Ninja Theory, all of which have since been divested or closed.
Turn 10 Studios
The Forza brand remains a lynchpin of Xbox’s racing strategy. Turn 10 Studios continues to operate, though the team is significantly leaner following the 2025 layoffs, during which the studio shifted its focus toward supporting the Forza Horizon series rather than traditional Motorsport development.
Source: Polygon
