Xbox 'Reset': 3,200 Jobs Cut, Four Studios Spun Off, Management Flattened

Xbox leadership (in a memo signed ‘Asha’) announced what it calls the biggest restructuring in the division’s history: roughly 3,200 roles eliminated across FY27, including about 1,600 immediately. Four studios are being cut loose — Compulsion Games and Double Fine return to independence with their IP and catalogs, Ninja Theory and Undead Labs move to new owners funded to finish Senua and State of Decay 3, and France’s Arkane is opening works-council consultation on ‘strategic options.’ Further reductions hit Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios, though leadership claims no already-announced first-party games are being cancelled.

The stated reason is bluntly financial. Xbox says it runs at margins 3–10x below comparable platform and publishing businesses, having entered the current console generation with a smaller install base and higher costs, then doubling down on Game Pass, multiplatform releases, and a wider content portfolio that never grew as projected. Management concedes the post-2018 studio buying spree was a mistake — a typical year lost 64 cents on every dollar invested — and frames the spin-offs as getting out of studios it was never the right home for, amid what it calls the industry’s most severe hardware downturn ever.

The plan also gutts internal bureaucracy: as many as 14 layers of management collapse to no more than five (ideally three), with platform teams described as 40% larger than at the generation’s start despite falling playtime. Vendor spend is being halved. Structurally, Mojang and King — now the biggest studios by monthly active users — report directly to Asha, and Helen Chiang is promoted to a newly created COO role with end-to-end P&L authority as longtime exec Dave McCarthy retires. Read together, it’s a striking reversal of the acquisition-and-subscription strategy Xbox spent years and tens of billions building.