Microsoft's Xbox division will eliminate approximately 3,200 positions over the coming year, with 1,600 staff departing immediately. The restructuring, described by new CEO Asha Sharma as the most significant in the company's history, includes the divestment of four game studios: Ninja Theory and Undead Labs will be sold to undisclosed buyers, whilst Compulsion Games and Double Fine Productions will be returned to their leadership teams as independent entities. A fifth studio, Arkane, is beginning consultations regarding its future. Microsoft confirmed that no previously announced games or projects will be cancelled as a result.

The layoffs span across all major Xbox divisions and reflect efforts to streamline operations and redirect investment. The company plans to maintain its content spending at record levels but will reallocate resources towards flagship franchises like Minecraft and The Elder Scrolls, which has not released a major title since 2011. Additionally, Sharma outlined structural reforms including reducing management layers from up to 14 to a maximum of 5, addressing what the company characterises as oversized platform teams relative to declining player engagement metrics.