Microsoft CEO says Xbox is 'streamlining' after cutting over 5,750 jobs
Microsoft CEO Satya Nadella has described the recent mass layoffs at Xbox as a natural "streamlining" process. This comes after the company has cut more than 5,750 jobs and shuttered several prominent studios over the past three years.
The restructuring within Xbox has intensified following the $68.7 billion acquisition of Activision Blizzard in October 2023. Since then, the company has undergone five rounds of layoffs. The latest wave, confirmed in July 2026, will see 3,200 employees depart from Xbox Game Studios by the end of the current fiscal year. This includes the divestment of studios such as Compulsion Games, Double Fine, and Undead Labs. Additionally, Arkane and Ninja Theory face the threat of closure.
The timeline of workforce reductions at Microsoft includes:
- In 2025, undisclosed cuts targeted subsidiaries like ZeniMax Online Studios and King.
- In January and September 2024, 2,550 workers were laid off.
- In May 2024, Arkane Austin, Tango Gameworks, and Alpha Dog Games were shuttered.
Despite these cuts, Nadella remains optimistic about the company's direction. He stated that the current "streamlining" of the team and IP portfolio is part of building a sustainable business model. According to Nadella, the goal is to serve as a premier publisher and platform provider for both PC and Xbox. He also noted that, based on information from leadership, the division is expected to see growth in the upcoming fiscal year.
However, significant challenges remain. Beyond the potential "brain drain" and internal uncertainty, the hardware division faces a component crisis. Massive investments in AI data centers by companies like Microsoft have driven up component costs, making Xbox hardware increasingly expensive and potentially limiting its market reach. This creates a difficult environment for the remaining studios tasked with revitalizing core franchises.
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