Microsoft’s gaming division is bracing for a wave of restructuring that could result in the largest single layoff event in the history of the industry. Following a series of rumors, reports suggest the company is preparing for significant personnel reductions and potential studio closures that may dwarf the 1,900 jobs cut in 2024 after the $75 billion Activision Blizzard acquisition.
Impending Studio Closures and Restructuring
George Broussard, a former developer on titles including Duke Nukem, Max Payne, and Prey, first signaled the scale of the situation, stating he had received information regarding a list of studio closures. According to reports from The Verge, Microsoft is currently weighing the closure of five studios. Among those mentioned are Arkane, known for Dishonored, Prey, Deathloop, Redfall, and a Marvel Blade project currently in development.
The current internal reset is being led by new Xbox CEO Asha Sharma. The activity follows recent layoffs at South of Midnight developer Compulsion Games. Additional reports from Bloomberg’s Jason Schreier and Gamesbeat indicate that other major studios, including Ninja Theory (Hellblade) and Double Fine (Kiln, Keeper, Psychonauts), as well as State of Decay 3 developer Undead Labs, are also at risk of being shut down or forced to seek independence.
Bungie Workforce Reductions
The broader Xbox and gaming ecosystem is also grappling with separate, confirmed personnel losses. Bungie has officially announced a reduction of its workforce following the conclusion of development on Destiny 2. The decision, which Sony Interactive Entertainment CEO Hermen Hulst attributed to a company-wide initiative, impacts a significant number of employees across the Destiny and Marathon teams, as well as support staff.
Bungie’s leadership stated that the studio could not continue operating at its previous size now that work on Destiny 2 has ceased. While the studio shifts its focus toward Marathon and early-stage incubation projects, the impact on staff is substantial, with community manager Dylan “dmg04” Gafner acknowledging the difficulty of the situation on social media.
As of June 30, 2026, the industry remains in a state of uncertainty regarding the final scope of the Xbox-specific closures. With reports pointing toward a start date of July 6, the coming week is expected to provide definitive answers for the affected studios and their employees.