Xbox announced a massive restructuring on July 6, 2026, confirming plans to cut 20% of its total organization over the next 12 months. This "reset" involves the departure of four long-standing studios, 3,200 total job losses, and a narrowed focus on specific key franchises under the Microsoft umbrella.

The Departing Studios

As part of the shift, Double Fine and Compulsion Games are transitioning to independent status. Microsoft is providing runway funding and allowing both teams to retain ownership of their intellectual property. Additionally, Undead Labs and Ninja Theory have been sold to new, as-yet-unnamed buyers. The status of Arkane Studios remains uncertain, with Xbox currently reviewing its “potential strategic options.”

While 350 job cuts are specifically linked to these four studio departures, the remaining 2,850 layoffs are spread across the broader organization. CEO Asha Sharma stated that the scale of cuts will “vary in size” across the remaining teams but emphasized that no projects currently in development have been canceled.

A Narrowed Focus on Key Franchises

With the dust settling, it is clear that Microsoft is prioritizing a smaller, more concentrated list of IPs. The strategy involves a heavy reliance on established heavy hitters:

  • Activision: The publisher remains central to the plan, with Infinity Ward, Raven Software, Treyarch, and Sledgehammer Games continuing work on the Call of Duty series. Call of Duty: Modern Warfare 4 is set for an October 23, 2026 release, though it will not be a day-one Game Pass title.
  • Bethesda: Despite reports of significant layoffs at Id Software—where roughly 90 staff members were cut—and a potential halving of the Elder Scrolls Online team at ZeniMax Online, Bethesda is sticking to a core slate. Future focus will center on Doom, The Elder Scrolls, Fallout, Quake, and Wolfenstein.
  • Mojang and King: Both studios will now report directly to CEO Asha Sharma. Mojang, responsible for the Minecraft franchise, is seeing its leadership move into higher-level corporate roles, with Helen Chiang promoted to Xbox’s first chief operating officer.
  • The Coalition and Halo Studios: Both teams remain core to the Xbox portfolio. The Coalition is currently preparing for the October 6 release of Gears of War: E-Day, while Halo Studios is moving toward the July 28 launch of Halo: Campaign Evolved.

Obsidian and Playground's Future

Obsidian Entertainment remains under the Xbox Game Studios banner, though reports indicate the studio was hit hard by the layoffs, losing approximately 25% of its workforce. While the studio is currently updating Grounded 2 and working on The Outer Worlds 2 DLC, there is no official word on a new project, though speculation persists regarding a potential return to the Fallout franchise.

Playground Games stands out as the last remaining studio from the 2018 expansion effort that included Compulsion, Undead Labs, and Ninja Theory. With the success of Forza Horizon 6 and the upcoming release of Fable, the studio remains a pillar of Microsoft's current strategy. Turn 10 Studios, despite previous staff losses in 2025, will also continue to support the Forza ecosystem.

Further details regarding the internal state of Blizzard are expected to be addressed during BlizzCon, scheduled for September 12-13, 2026.