Microsoft Xbox Lays Off Hundreds, Consolidates Studios in Major Restructuring

Microsoft's Xbox division has faced mounting pressure to boost its gaming business after a challenging year. Earlier in 2026, the company already made significant layoffs, affecting a large number of employees in the gaming segment.

The push for change has been led by Xbox CEO Asha Sharma, who is aiming to return the business to growth by the end of the 2027 financial year. As part of this effort, Microsoft began considering ways to streamline operations and consolidate its various gaming studios.

On September 22, 2026, reports emerged that Microsoft planned to lay off hundreds of employees within its Xbox division and merge several internal game studios. The cuts were expected to hit multiple teams across the company.

Shortly after, Microsoft confirmed that 268 staff members in the Xbox unit would be let go. This move came as part of what company leadership described as a broader "reset" of its gaming business, following a previous round of layoffs that impacted 1,600 Xbox employees earlier in the year.

As part of the restructuring, control of prominent game franchises, including Halo, is being shifted to Activision, which Microsoft acquired in 2023. There is also concern about the future of Ninja Theory, a well-known studio that may face closure as a result of these changes.

Additional changes include the consolidation of other studios and the transfer of Obsidian to Bethesda, further reshaping the structure of Microsoft's gaming operations.

Microsoft's Xbox division is currently undergoing a major reorganization, with 268 layoffs confirmed and several studios being merged or closed. The fate of Ninja Theory remains uncertain, and more announcements are expected soon.

The company is focusing on consolidating its resources under larger units like Activision and Bethesda, while continuing to seek ways to return to growth. The situation is still developing, with staff and fans awaiting further details.

Further job cuts could be announced later this week, and the future of specific studios such as Ninja Theory is still unclear. Industry watchers will be looking for official updates from Microsoft on which teams and projects are most impacted, and how the new structure will affect the release of future games.