Xbox Prepares for New Mass Layoffs: Fifth Wave in Two Years, Insider Says

According to SneakersSO’s insider, Xbox is expected to undergo another round of layoffs in the first quarter of 2026 — a reduction said to be similar in scale to the cuts that occurred this past summer. If true, this would mark the fifth wave of job losses over the last two years.

The games industry is going through a turbulent period: project cancellations, studio shutdowns, and large-scale redundancies have become commonplace. Xbox, insiders say, has faced particular difficulties — some business units reportedly have not delivered consistent profitability since the Xbox 360 era.

The previous round took place on July 2, 2025, when Microsoft laid off roughly 9,000 employees, about 2,000 of whom were from Xbox. That round also saw the closure of The Initiative and several ongoing projects. Despite an extensive portfolio of franchises — including some recently acquired — the company appears to be narrowing its focus to core IP and, according to reports, is considering exiting in-house console manufacturing.

Sources claim the next tranche of cuts will target Xbox’s central team, since a wind-down of the hardware division would eliminate much of the work involved in designing and assembling devices.

Source: iXBT.games