Xbox has spun off four studios, including Ninja Theory, the creator of Senua, as extensive layoffs commence.

      Fortunately, these layoffs will not result in the cancellation of any previously announced first-party games or projects.

      Microsoft's Xbox division has initiated a major restructuring today, a move they have hinted at for weeks. The company has revealed layoffs impacting around 3,200 positions over the next few years, with nearly half of these roles set to be cut starting today. Additionally, the gaming division is shutting down four studios, including Ninja Theory, known for the popular Senua game series. Importantly, the company has assured that no previously announced first-party games will be affected or canceled.

      What’s going on?

      This is a significant email I sent today to all Xbox employees: "Team, we are embarking on the most extensive restructuring in Xbox's history. After careful thought, I have made the tough choice to reduce our workforce by approximately 3,200 by FY27. This will include…"— ASHA (@asha_shar) July 6, 2026

      Xbox is entering a year-long phase of restructuring, something that has been circulating in rumors for some time. The company claims its operating margin is 3-10 times lower than that of competing platforms (notably PlayStation and Nintendo). Additionally, the install base is smaller, and the costs associated with its latest generation platform are the highest they’ve ever been. The company also observes that Xbox Game Pass and its multi-platform gaming strategy have not produced the desired results.

      "Our current business is not healthy."

      “I understand that this is difficult. These changes will impact individuals who have dedicated their creativity to building Xbox. Many joined us through acquisitions, while others sought us out for their passion for this industry and love for Xbox. Today's decisions do not reflect their talent or commitment,” stated Xbox leader Asha Sharma in an official blog post. This marks the second major round of layoffs following a restructuring effort that occurred in 2024.

      What about the studios?

      The biggest change as part of the reset involves the reduction of studios. Compulsion Games (known for South of Midnight, We Happy Few, and Contrast) and Double Fine Productions (Psychonauts 2, Kiln, Keeper, and Broken Age) are becoming independent, which means they are officially leaving the Xbox Games Studio umbrella. These studios will take their intellectual property, catalog, and operations with them.

      Moreover, Ninja Theory and Undead Labs are also set to have new owners. Ninja Theory has been behind some of the most recognizable Xbox titles in recent years, including Senua, Senua’s Saga: Hellblade II, Hellblade: Senua’s Sacrifice, and Bleeding Edge. Undead Labs, creator of the State of Decay series, has also been let go.

      Nadeem is the Managing Editor at Digital Trends.

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