Xbox’s Major Layoffs Spark Mixed Reactions Online: Relief and Outrage Over ‘Tone-Deaf’ Justifications
This morning, an email circulated among Xbox employees detailing a significant reorganization that CEO Asha Sharma described as “the most significant restructure in Xbox history.” The plan includes substantial layoffs and the transition of Compulsion Games and Double Fine into independent studios. Additionally, Ninja Theory and Undead Labs will be sold off, receiving funding to continue development on their upcoming titles, Senua and State of Decay 3.
Sharma expressed concern over the health of the business, noting that Xbox has overspent and underperformed. “As that happened, our core business weakened, and we added more teams, more investment, and more time, hoping for a better outcome.” It’s disheartening to finally hear what many have suspected for years. An Xbox that prioritized sustainability over relentless growth might not have pursued a $70 billion acquisition of Activision Blizzard or discouraged players from purchasing their most ambitious games by placing them on Game Pass. The reactions to the news of studio spin-offs and the layoffs of 3,200 employees reflect a grim sense of relief within the gaming community, shaped by the trauma of the past five years.
While the cuts are significant, Xbox has avoided closing any studios today. Double Fine and Compulsion are now independent, Ninja Theory and Undead Labs will have new owners, and Arkane Lyon’s future is under negotiation. CEO Asha Sharma aims for Xbox to reach 1 billion players daily, a stark contrast to the current annual figure of 1 billion.
The news is undoubtedly troubling, but it’s a relief that studios aren’t being completely shut down. There’s hope that these teams can recover in some capacity.
While the layoffs are tragic, especially in the current economic climate, there’s a silver lining: the studios we feared would close are still standing. Two are now independent, two have been sold, and Arkane is in talks for its future. It’s not the disaster many anticipated.
Some critics argue that Microsoft has orchestrated this situation to appear less damaging while still executing significant layoffs, all while the leadership seems distracted by other ventures. This marks the fifth major round of layoffs at Xbox since the $70 billion acquisition of Activision Blizzard in 2023, with another 3,200 jobs lost, leaving many questioning the accountability of the executives involved.
The conversation today largely revolves around the fate of the studios that create our favorite games, but we must also remember the hundreds of skilled individuals in supporting roles who are affected. While no studios are closing, the personal and professional losses are substantial.
Many believe the recent showcase should not have happened, among other missteps over the years. Game Pass is being criticized as one of the most damaging initiatives in gaming history, having acquired numerous large studios that now face challenges, diminishing the value of individual games and leading to unforeseen negative consequences, all without repercussions for the executives responsible.
The situation is precarious for all the studios involved, whether sold or independent, as Xbox attempts to maintain a façade of mercy amidst the turmoil. A closer look at Sharma’s email reveals another frustrating point: “We are operating at margins that are 3-10x lower than comparable platform and publishing businesses,” suggesting that while Xbox isn’t losing money, it isn’t making enough.
Despite claims of a crash in the gaming industry, it’s clear that major publishers and platform owners are still profiting while laying off staff and closing studios. This isn’t a market crash; it’s a troubling trend.
Sharma’s ambition for Xbox to reach 1 billion players daily raises questions about the feasibility of such a goal. The path to achieving this seems to involve sacrificing the very means by which players engage with games.
In 2025, Xbox reported around $24 billion in revenue, with an estimated profit of about $700 million. Even in a challenging global environment, Xbox managed to generate nearly a billion in net profit, yet it wasn’t deemed sufficient.
The most disheartening aspect of this situation is the apparent lack of learning from past mistakes. Sharma’s goal of reaching 1 billion players daily raises critical questions: With what games? With what workforce? Amidst a boycott and a declining reputation, it’s hard to see how this vision can be realized.
Looking ahead, it’s easy to predict further layoffs, as the pattern has been consistent since the Activision Blizzard acquisition. The timeline of job cuts at Xbox since then paints a bleak picture, with significant layoffs occurring regularly.
Xbox increasingly feels less like a gaming company and more like a holding area for games and their developers. Sharma’s email suggests this is a “reset,” but it’s uncertain whether the company can truly recover from this state.
