Microsoft plans major Xbox layoffs, studio closures and game cancellations

Microsoft is preparing a new round of Xbox layoffs that could trigger studio closures, spinoffs, mergers and canceled games just as the company pushes its gaming business through a 100-day reset. The cuts are expected shortly after Microsoft closes its fiscal year on June 30, adding fresh pressure to a division that says it reaches more than 1 billion players a year across console, PC, mobile and streaming.

In a June 10 internal memo, Xbox leadership said the business is entering a 100-day “reset” and asked staff to balance “optimism and realism” as it confronts hard truths. The memo said Microsoft has invested more than $20 billion in the gaming business over the past five years, yet Xbox’s core revenue has declined and the division is headed toward roughly a 3% accountability margin for the fiscal year ending June 30. That is the backdrop for a layoff round that could reach beyond headcount and reshape which studios survive inside Microsoft’s empire.

The company has already shown its willingness to make deep cuts. In May 2024, Microsoft shut down Arkane Austin, Tango Gameworks and Alpha Dog Games, and folded Roundhouse Studios into ZeniMax Online. Those moves came after Microsoft’s $7.5 billion ZeniMax acquisition closed in 2021, one of the biggest bets in Xbox history and one meant to expand the company’s first-party content pipeline.

Attention has now turned to Arkane Lyon, the French studio behind Dishonored and Deathloop, because it is developing Marvel’s Blade. Bethesda and Marvel Games officially announced the project on December 7, 2023, describing it as a mature, single-player, third-person game set in Paris. Its absence from the June 2026 Xbox Games Showcase fueled cancellation speculation online, but Todd Howard said in June that he had seen Blade in May and that Arkane was “doing a really, really great job.”

The uncertainty reaches beyond Arkane Lyon. Several Xbox studios, including Compulsion Games, Double Fine Productions and Ninja Theory, have been reported to be exploring spinoff or buyout options to avoid closure. Unionized Xbox workers have also publicly demanded layoff protections ahead of the expected cuts. Microsoft has not publicly confirmed the scope of the layoffs or which studios would be affected, but the coming round would test whether Xbox is still willing to keep funding ambitious, high-risk projects or is moving toward a tighter model built around safer franchises and subscription economics.