Microsoft's Xbox division is implementing a major workforce reduction, with CEO Asha Sharma announcing over 1,600 immediate job cuts as part of a broader restructuring affecting 3,200 roles throughout the fiscal year. The layoffs extend across multiple gaming subsidiaries including Activision, Bethesda, Blizzard, and Mojang, whilst several acquired studios are being divested—Compulsion Games and Double Fine will become independent developers, while Ninja Theory and Undead Labs are being sold with ongoing funding to complete their current projects.

The announcement starkly contradicts the momentum Sharma generated upon assuming leadership, which included Game Pass price reductions and announcements of console-exclusive titles. Timing coincides with another round of hardware price increases effective August 1st, with the Series S rising from $299 to $499 and the Series X from $499 to $799—representing the third increase in 13 months. The restructuring follows an internal memo titled "Xbox Reset" that warned of necessary but difficult changes, marking a sharp reversal from the goodwill the division had accumulated in recent months.