After weeks of speculation, Xbox has officially confirmed a significant restructuring under new CEO Asha Sharma. The company is eliminating 3,200 total positions across Microsoft, with 1,600 of those cuts directly impacting the Xbox division.
This "reset" marks a major shift in strategy for the gaming giant. Sharma stated that while previous investments in Game Pass and multi-platform growth created value, they failed to grow at the expected pace. As the core business weakened, the company continued to invest more time and resources, a strategy that ultimately proved unsustainable amidst what Sharma describes as the most severe hardware crisis in the industry's history. According to Xbox, console storage and memory prices have spiked by over 250% recently, with costs expected to double again by next fall.
Studio Divestments and Organizational Changes
As part of the overhaul, four studios will be leaving the Xbox family. Double Fine and Compulsion Games are transitioning to independent status, returning to private ownership under their original founders. Compulsion Games confirmed via social media that they will retain the rights to their titles, including We Happy Few and South of Midnight. Additionally, Ninja Theory and Undead Labs will be sold to new ownership, with funding secured to complete and grow Senua and State of Decay 3.
The status of Arkane Studios remains uncertain. Sharma indicated that the company is currently reviewing strategic options, though the process is expected to take several months, partly due to complexities involving French labor laws.
Operationally, the company is centralizing control. Helen Chiang, previously the corporate VP of the Minecraft franchise, has been named the first-ever Xbox Chief Operating Officer. She will hold end-to-end profit and loss responsibility across hardware, content, platform, and services. Current COO Dave McCarthy is retiring after a 17-year tenure with the company.
Future Investment Strategy
Moving forward, Xbox intends to shift its focus toward higher-priority projects. While the specific standing of studios like Obsidian remains unclear at this time, Sharma identified Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios as primary targets for future investment. Reports suggest that Bethesda/ZeniMax will specifically prioritize major franchises including Fallout, The Elder Scrolls, Doom, Quake, and Wolfenstein.
Despite the severity of the cuts, leadership has provided some reassurance regarding the current software pipeline. Sharma confirmed that no first-party, publicly announced games or projects are being cancelled as a result of these organizational changes.