Microsoft’s Xbox restructuring is reportedly expected to result in fewer job losses than the approximately 3,200 roles originally targeted for elimination. Windows Central’s Jez Corden reports that sources now expect the final figure to fall short of Microsoft’s July estimate as the company relies on employee transfers, studio divestitures and other organizational changes alongside direct layoffs. Microsoft has not announced a revised final headcount target.
Xbox originally said on July 6 that it intended to reduce its workforce by approximately 3,200 positions throughout fiscal year 2027, with around 1,600 roles being eliminated immediately. The cuts formed part of Xbox CEO Asha Sharma’s broader restructuring plan for Microsoft’s gaming business, which also included reducing management layers, lowering vendor spending and reorganizing its portfolio. At the time, Microsoft made clear that the process would continue over an extended period rather than conclude with a single round of layoffs.
According to Windows Central, Microsoft is now attempting to limit the number of additional employees who lose their jobs by moving workers into other departments where possible. Studio divestitures are another part of that approach, since transferring entire development teams outside Microsoft removes those employees from Xbox’s internal headcount without necessarily eliminating their positions. The outlet’s sources therefore expect the eventual number of actual layoffs to remain below the initial 3,200 estimate.
Microsoft’s own September 22 update provides additional context without confirming that projection. Xbox Game Studios head Matt Booty said actions completed since July, including studio divestitures, have brought the company roughly three-quarters of the way through the restructuring announced earlier in the year. Microsoft also confirmed another 268 role eliminations across Xbox, affecting Halo Studios, other first-party developers and Xbox Game Studios management and central functions.
The company has increasingly used ownership changes alongside direct workforce reductions. Compulsion Games and Double Fine Productions returned to management in August with their intellectual property, back catalogs and runway funding, while Undead Labs has since completed a similar transition and secured a new publisher for State of Decay 3. Microsoft previously intended to transfer Ninja Theory to new ownership as well, although two separate agreements failed and the company has now begun consultation over a proposed closure while continuing to explore alternatives.
Microsoft is simultaneously reorganizing several studios that remain within its gaming business. Activision is taking responsibility for Rare and World’s Edge and will create a purpose-built team for the next Halo game, while Bethesda is expanding its remit to include Obsidian Entertainment. Playground Games and Turn 10 are also being combined into a single organization focused on Forza and Fable, while King is assuming oversight of Microsoft Casual Games.
Those structural changes help explain why Microsoft’s original 3,200 figure does not necessarily translate directly into 3,200 people being laid off. Some positions can disappear from Xbox’s internal workforce through studio transfers, while others may be preserved by moving employees into different roles. Microsoft said in July that it would look for alternatives to job elimination where possible, including redeployment within the company.
The current restructuring has nevertheless continued to produce direct layoffs across Microsoft’s development organization. Reports indicate that the latest wave extends beyond Halo Studios into teams including The Coalition and World’s Edge, while employees at Treyarch and Raven Software were also reportedly affected. Microsoft has not provided a studio-by-studio accounting of all 268 positions eliminated in the September round.
For now, the only official long-term benchmark remains Microsoft’s July estimate of approximately 3,200 Xbox workforce reductions across fiscal 2027. Windows Central’s reporting indicates that the eventual number of employees actually laid off is now expected to be lower, but no replacement total has been disclosed. With Microsoft describing the restructuring as roughly three-quarters complete, further organizational changes and job reductions are still expected before the process concludes.
