Xbox CEO Asha Sharma confirmed the division will eliminate 3,200 positions over the next year, with 1,600 cuts taking effect immediately across Activision, Bethesda, Blizzard, King, Mojang, and Xbox Game Studios. The reductions form part of Microsoft's broader 4,800-person workforce reduction, roughly 2.1 percent of its global headcount. Sharma wrote that Xbox operates at margins "3-10x lower than comparable platform and publishing businesses" and acknowledged the division lost "64 cents for every dollar we invested" in a typical year.

Four studios are changing ownership rather than closing. Compulsion Games and Double Fine Productions will operate independently, retaining their IP and catalog. Ninja Theory and Undead Labs have secured new owners with funding to complete *Senua's Saga: Hellblade II* and *State of Decay 3*. Arkane Studios in Lyon enters consultation with its French Works Council under local labor law, while its *Blade* project reportedly targets late 2027.

Leadership shifts accompany the restructuring. Chief operating officer Dave McCarthy is retiring; Helen Chiang, a decade-long Minecraft leader, becomes COO with full profit-and-loss authority across content, hardware, platform, and services. Mojang and King now report directly to Sharma as she flattens management layers. No publicly announced first-party games are canceled, though investments are shifting to "higher priority projects."

The cuts follow Xbox's console price hikes blamed on memory and storage costs — expenses inflated partly by Microsoft's own AI infrastructure buildout. After two prior layoff rounds since 2024, this reset signals a strategic pivot from studio acquisition toward platform enablement, but the immediate human cost and uncertainty around Arkane's future underscore the volatility beneath Xbox's Game Pass bet.