The Xbox cuts are official, and the list doesn't match the leak. In a post titled Resetting Xbox and an all-staff email sent Monday, July 6th, Xbox CEO Asha Sharma confirmed roughly 3,200 jobs are being cut through FY27, with about 1,600 of those being effective on day one. That's around 20% of the entire Xbox workforce, and Sharma is calling it the "most significant restructure in Xbox history."
We've been tracking this one all weekend. The leak version claimed five studios were dead and Marvel's Blade canceled, after earlier reports put Arkane and Blade at risk. The layoffs are very real, but the two biggest claims didn't materialize.
Four studios are leaving Xbox, and none of them are being closed.
Double Fine and Compulsion Games are being spun off as independent studios, and both will be keeping their IP. That means Psychonauts stays with Double Fine and South of Midnight stays with Compulsion.
Ninja Theory and Undead Labs are being sold to buyers Microsoft won't name yet, with the deals expected "later this summer," and both sales come with funding to finish the new Senua project and State of Decay 3.
A bit of history makes this sting more. Microsoft picked up Ninja Theory, Undead Labs, and Compulsion in one E3 2018 shopping spree, then added Double Fine in 2019. Arkane arrived through the $7.5 billion ZeniMax deal in 2021. Seven years after that E3 stage moment, three of the four studios announced that day are headed back out the door.
Arkane Lyon is the complicated one. The only official word is that the studio is "beginning required consultation with its Works Council" to review "strategic options," which is a step required by French labor laws before any major structural changes can happen. The Verge reports Microsoft is exploring a sale, but that's a RUMOR. It has NOT been confirmed, and as of today Arkane is neither closed nor sold.
Marvel's Blade is NOT being canceled either. Sharma addressed it head-on in her email: "None of our first party publicly announced games or projects are being cancelled as part of these reductions."
It's worth noting what that sentence leaves out. "Publicly announced" offers zero cover to anything Xbox hasn't revealed yet, and The Verge's Tom Warren reports the game is over budget, has slipped to late 2027, and has its fate tied to whatever happens with Arkane. None of that comes directly from Microsoft.
The restructuring goes deeper than simply a headcount. Management layers are being flattened from as many as 14 down to a maximum of 5, and Mojang and King now report directly to Sharma.
Game Pass "did not grow at the pace we expected," according to the post, but it continues, and so does work on next-gen console hardware. The priority franchises going forward: Minecraft, The Elder Scrolls, Halo, Fallout, and DOOM.
Why cut this deep? Sharma told staff that "our business today is not healthy," with margins reportedly running 3 to 10 times lower than comparable businesses. She was even more blunt in an exclusive interview with Fortune: "we simply spread ourselves too thin."
For players, the confirmed picture beats the weekend rumors. Psychonauts and State of Decay didn't die with their studios, the Senua project and State of Decay 3 are funded through completion, and Blade is alive and well (so far). The real worry sits with Arkane Lyon and with every UNANNOUNCED project at the remaining studios, since that carefully worded "publicly announced" promise says nothing about them.
GameSpot has a full rundown of everything that's been confirmed so far.
One last wrinkle. After the news broke, Arkane founder Raphael Colantonio publicly asked Sharma "how much?" about buying his old studio back, as Kotaku reports. He founded the place back in 1999, so you can't blame him for asking!
If Microsoft really is open to selling Arkane, who would you trust to run it? Which of the four departing studios do you think will land in the best spot? Let us know in the comments below!
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