Microsoft Fires 4,800 in a Day, Two-Thirds From Xbox — Double Fine, Ninja Theory and Two More Studios Cut Loose
TL;DR
Microsoft cut 4,800 jobs on July 6 — 3,200 from Xbox this fiscal year (20% of the division). Double Fine, Compulsion, Ninja Theory and Undead Labs spun off. Same year's AI capex: $190B, up 61%.
Microsoft announced 4,800 layoffs on July 6 — 2.1% of global headcount — with 3,200 seats coming out of Xbox this fiscal year. The first 1,600 cuts take effect immediately, equal to 20% of Xbox's global workforce. The same day, the gaming unit spun off four studios and rewired its publishing chain.
Xbox CEO Asha Sharma's memo to staff was blunt: "In some parts of the company work passes through as many as 14 layers of management. Our platform teams are 40% larger than they were at the start of this generation, even as our player base and playtime have declined." She called the round a Xbox reset.
The four studios cut loose: Double Fine and Compulsion Games return to independence, keeping IP and back catalogue. Ninja Theory (working on Senua's Saga) and Undead Labs (State of Decay 3) were sold to undisclosed buyers, with both projects continuing under the original teams. Arkane Lyon (Marvel's Blade) is under strategic review.
On the org side, Mojang and King now report directly to Sharma, and Helen Chiang was promoted to Xbox COO. CNBC cited earnings data putting Xbox's margin at just 3% — three to ten times lower than Microsoft's other platforms.
The contrast sits in the capital line. Microsoft's 2026 calendar-year capex guidance is $190 billion, up 61% year over year, well past Wall Street's $155B estimate. The money keeps flowing into AI data centres. In the same finance cycle, Xbox lost 20% of headcount, four studios and a full management layer. The stock is down 23% through the first half of 2026.
If it works, Xbox sheds weight and Game Pass plus the multi-platform push finally clears the margin bar. If it doesn't, the $190B AI capex fails to lift revenue, and one of the four spun-off studios ships a Senua's Saga-tier hit that proves Microsoft should have kept it.
via CNBC / GeekWire / TechCrunch / Thurrott
Xbox CEO Asha Sharma's memo to staff was blunt: "In some parts of the company work passes through as many as 14 layers of management. Our platform teams are 40% larger than they were at the start of this generation, even as our player base and playtime have declined." She called the round a Xbox reset.
The four studios cut loose: Double Fine and Compulsion Games return to independence, keeping IP and back catalogue. Ninja Theory (working on Senua's Saga) and Undead Labs (State of Decay 3) were sold to undisclosed buyers, with both projects continuing under the original teams. Arkane Lyon (Marvel's Blade) is under strategic review.
On the org side, Mojang and King now report directly to Sharma, and Helen Chiang was promoted to Xbox COO. CNBC cited earnings data putting Xbox's margin at just 3% — three to ten times lower than Microsoft's other platforms.
The contrast sits in the capital line. Microsoft's 2026 calendar-year capex guidance is $190 billion, up 61% year over year, well past Wall Street's $155B estimate. The money keeps flowing into AI data centres. In the same finance cycle, Xbox lost 20% of headcount, four studios and a full management layer. The stock is down 23% through the first half of 2026.
If it works, Xbox sheds weight and Game Pass plus the multi-platform push finally clears the margin bar. If it doesn't, the $190B AI capex fails to lift revenue, and one of the four spun-off studios ships a Senua's Saga-tier hit that proves Microsoft should have kept it.
via CNBC / GeekWire / TechCrunch / Thurrott
