Microsoft’s Xbox division is reportedly preparing to lay off hundreds of employees this week while also consolidating several of its game studios. The Information reports that the plans come from a person briefed on the restructuring, which would mark another major phase of job reductions at Xbox in 2026. Microsoft has not yet publicly detailed the upcoming cuts or identified which studios may be combined.
The report says the layoffs are expected this week and describes them as Xbox’s second major staff reduction of the year. More significantly, Microsoft is also said to be preparing to consolidate several game-development studios, although The Information did not name the teams involved or explain how the consolidation would be structured. It is therefore unclear whether that process would involve studio mergers, shared management, reduced administrative functions or another form of organizational integration.
The cuts would follow the sweeping restructuring Microsoft announced in July. Xbox CEO Asha Sharma told employees at the time that approximately 3,200 positions would be eliminated throughout fiscal 2027, including around 1,600 roles immediately. She described it as the most significant restructuring in Xbox history and warned that the changes could not all be completed in a single day, meaning further reductions during the fiscal year had already been expected.
That July plan also changed the structure of Microsoft’s gaming portfolio. Compulsion Games and Double Fine Productions were set to return to independent management with their intellectual property and funding, while Ninja Theory and Undead Labs entered arrangements to move under new ownership. Microsoft additionally began reviewing strategic options for Arkane in France and made reductions across Activision, Bethesda/ZeniMax, Blizzard, King, Mojang and Xbox Game Studios.
Microsoft said at the time that none of its publicly announced first-party games were being canceled as part of those reductions. The company instead framed the changes as an attempt to concentrate investment, reduce organizational fragmentation and improve the financial performance of Xbox. Sharma acknowledged that the business was not healthy and said Xbox needed clearer priorities, greater operating discipline and a more unified structure across content, hardware, platform and services.
The newly reported studio consolidation would fit that broader objective, but there is not yet enough information to determine which developers could be affected. Microsoft owns or controls a wide collection of gaming operations following years of acquisitions, including Bethesda, Activision, Blizzard, King and numerous Xbox Game Studios teams. Consolidating some of those organizations could reduce duplicated management or support functions, but it could also create uncertainty around individual studio identities and staffing.
The Information’s report also arrives shortly after separate indications that further upheaval was approaching Microsoft’s gaming division. Bloomberg reporter Jason Schreier recently said that Blizzard layoffs were “coming and imminent,” while VGC editor-in-chief Andy Robinson warned that more negative Xbox news was expected shortly. Neither comment established the scope of the broader restructuring now described by The Information, but together they pointed toward another round of changes following July’s initial cuts.
Xbox’s workforce reductions have already affected thousands of employees this year. The July restructuring included cuts across Microsoft-owned studios and publishing operations, while some affected teams have since organized protests or relied on union agreements covering severance, recall rights and other layoff protections. Microsoft has maintained that it still intends to invest heavily in gaming while restructuring how that investment is distributed.
For now, the reported layoffs and studio consolidations have not been formally announced by Microsoft. The Information says hundreds of Xbox employees are expected to lose their jobs this week, but no exact figure or list of affected studios has been disclosed. More detail is likely to emerge once Microsoft begins notifying employees or publicly confirms the next phase of its fiscal 2027 restructuring.
