Microsoft's video-game business appears set for another painful round of cuts. According to reporting on the company's plans, its Xbox division is preparing significant layoffs and studio closures as it reshapes the business around its fiscal year-end.
New leadership, new direction
The moves come under new management. In February, Microsoft named Asha Sharma as chief executive of Microsoft Gaming, after the retirement of Phil Spencer, the longtime Xbox chief who spent nearly four decades at the company and is staying on in an advisory role. Sharma, who previously led product in Microsoft's AI business, has been charged with improving the profitability of a division that has struggled to translate heavy spending into commensurate returns.
Bloomberg has reported that the unit is planning substantial job reductions and that some studios are bracing for closure, with the changes expected around the close of Microsoft's fiscal year on June 30. Microsoft has not published official figures, and specific numbers reported by various outlets could not be independently confirmed.
A pattern of cuts
The restructuring would extend a difficult stretch for Microsoft's games workforce. The company has carried out several rounds of layoffs across its gaming operations in recent years, and in 2024 it closed a number of studios, including Arkane Austin and Tango Gameworks — the latter the maker of the well-reviewed "Hi-Fi Rush" — a decision that drew criticism across the industry.
Those moves followed Microsoft's roughly $69 billion acquisition of Activision Blizzard, completed in 2023, which made it one of the largest forces in gaming but also added scale — and cost — to a business now under pressure to deliver stronger margins.
Microsoft's position, and the concerns
Microsoft has publicly pushed back on the idea that it is retreating from gaming, saying it is not reducing its overall investment in games even as individual teams and projects are affected. The company has also indicated in the past that some staff losing their roles may be able to move to other positions internally.
Industry figures and worker advocates have voiced alarm at the scale of the expected cuts, warning about the human cost of repeated restructuring in a sector that has shed thousands of jobs over the past two years. Unionized employees at parts of Xbox have been among those criticizing management's handling of the process.
For now, much of the detail remains a matter of reporting rather than formal announcement. What is clearer is the direction of travel: under new leadership, Microsoft is moving to make its gaming arm leaner and more profitable — and, in the near term, that is likely to mean fewer studios and fewer jobs.
