Xbox considers canceling the Blade game and closing Arkane Studios.

Microsoft is gearing up to announce significant layoffs within its Xbox studios and workforce next week. Insider sources indicate that these layoffs could result in studio closures, spinoffs, potential mergers, and the cancellation of several games.

Reports suggest that Microsoft is considering shutting down at least five studios, including the team working on Marvel’s Blade. The decision to cancel Blade appears to be part of broader cost-cutting measures affecting the Xbox gaming division.

Blade, developed by Arkane Studios in France—renowned for the Dishonored series—was initially slated for release later this year. However, sources indicate that the internal launch date has been pushed back to late 2027, with the project also exceeding its budget.

In addition to the potential cancellation of Blade, Microsoft is exploring the possibility of selling Arkane Studios. Recent reports have highlighted that the company is also looking to spin off Compulsion Games, Double Fine, and Ninja Theory. Furthermore, there are ongoing efforts to find a buyer for Undead Labs, the studio behind State of Decay. If buyers are secured for these studios, they may avoid closure, but sources caution that negotiations could take several months.

Compulsion Games, known for South of Midnight, is reportedly bracing for imminent closure and has advised employees to seek new job opportunities. Meanwhile, Ninja Theory staff were informed earlier this month that the studio, based in the UK, may face closure or a potential spinoff.

In addition to the studio closures, Microsoft is preparing for a significant wave of layoffs within Xbox that will fundamentally alter its gaming division. These layoffs are expected to commence on July 6th and will affect various sectors of Xbox. Speculation suggests that there could be at least 1,000 job losses, and if five studios are closed, that could impact around 500 employees before the broader cuts take effect.

This upcoming round of layoffs is part of a “reset” for the Xbox division under new CEO Asha Sharma, who hinted at the need for “hard choices” last month. Sharma has consistently warned that the Xbox business is not in a healthy state, but she also emphasized that her goal is not merely to achieve a 30 percent accountability margin; rather, it is to establish the company as the leading force in gaming and entertainment.