Xbox Reset Reportedly Includes Largest Layoffs in Division History, Four Studios at Risk
The reported scale of layoffs and potential studio closures signals a dramatic cost-cutting push at Xbox, driven by a profitability gap that has persisted despite massive investment.
Reporting from 2 sources: Automaton, Game Spark.
According to GamesBeat, Microsoft's Xbox division is undergoing a restructuring plan called "Xbox Reset" that includes layoffs of up to 400 or more people, the largest workforce reduction in the division's history. Four studios-Ninja Theory, Compulsion Games, Double Fine, and Undead Labs-are reportedly at risk of closure if no buyers are found. Undead Labs is currently developing State of Decay 3, which has been delayed to 2027. The division's profitability metric has dropped to 3%, far below a 30% target.
GamesBeat reported on June 30 that Undead Labs, the developer behind the State of Decay series, has been added to the list of studios Microsoft is seeking to sell or close as part of the "Xbox Reset" restructuring. The studio joins Ninja Theory, Compulsion Games, and Double Fine, which were previously reported to be at risk. Undead Labs is currently working on State of Decay 3, which has been delayed to a 2027 release. If no buyer is found, the studio may close soon, according to sources speaking to GamesBeat. The closure of all four studios could result in the loss of approximately 435 jobs.
Bloomberg and The Verge have also reported, citing insider sources, that large-scale layoffs were planned. The "Xbox Reset" internal memo was issued on June 10 by CEO Asha Sharma and Chief Content Officer Matt Booty. The division's accountability margin has dropped to 3%, far below Microsoft's 30% target. Bloomberg reporter Jason Schreier noted on BlueSky that Xbox is also reviewing contracts with partners, and Assembly, an advertising agency handling Xbox PR, has already conducted layoffs. The Xbox division has not officially commented on studio closures or layoffs.
Synthesized by Yomimono from the 2 cited sources below, including Japanese-language reporting where cited, then editorially reviewed before publishing.