Xbox spins off four studios, which includes Ninja Theory, the developer of Senua, as major layoffs commence.

Xbox spins off four studios, which includes Ninja Theory, the developer of Senua, as major 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 significant restructuring today, a change it has hinted at for weeks. The company has revealed plans to lay off approximately 3,200 employees by 2027, with nearly half of those cuts effective immediately. Furthermore, the gaming division is shutting down four studios, including Ninja Theory, known for creating the acclaimed Senua game series. Importantly, the company assures that none of the already announced first-party games will be disrupted or canceled.

      What's taking place?

      I sent an important email to all XBOX employees today stating: "Team, we are starting the most major restructure in XBOX's history. After much thought, I have made the tough choice to reduce our team by around 3,200 by FY27. This will involve..."— ASHA (@asha_shar) July 6, 2026

      Xbox is embarking on a year-long restructuring process, a topic that has circulated in rumors for some time. The company claims that its operating margins are significantly lower—by 3-10 times—than those of competing platforms (i.e., PlayStation and Nintendo). Furthermore, it is facing challenges with a smaller install base and higher costs associated with its ninth-generation console. Microsoft also indicates that its Xbox Game Pass and multi-platform game strategy did not achieve the anticipated outcomes.

      Our current business is not in a healthy state.

      "I understand this is a difficult situation. These changes will impact individuals who have invested their creativity into building XBOX, many of whom joined through acquisitions or were recruited because of their passion for this industry and XBOX. Today's decisions do not reflect their talent or commitment," wrote Xbox chief Asha Sharma in an official blog post. This marks the second significant round of layoffs following a restructuring effort in 2024.

      What about the studios?

      Xbox / Microsoft

      The largest aspect of this reset is the studio cuts. Compulsion Games (known for South of Midnight, We Happy Few, and Contrast) and Double Fine Productions (famous for Psychonauts 2 and various other titles) will now operate independently, leaving the Xbox Games Studio banner. They will also retain their intellectual properties, catalogs, and assets.

      Additionally, Ninja Theory and Undead Labs will be transitioning to new ownership. Ninja Theory has produced some of the most notable Xbox titles in recent years, including Senua, Senua's Saga: Hellblade II, and Hellblade: Senua's Sacrifice, among others. Undead Labs, recognized for the State of Decay series, has also been let go.

      Nadeem is the Managing Editor at Digital Trends.

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Xbox spins off four studios, which includes Ninja Theory, the developer of Senua, as major layoffs commence. Xbox spins off four studios, which includes Ninja Theory, the developer of Senua, as major layoffs commence. Xbox spins off four studios, which includes Ninja Theory, the developer of Senua, as major layoffs commence. Xbox spins off four studios, which includes Ninja Theory, the developer of Senua, as major layoffs commence. Xbox spins off four studios, which includes Ninja Theory, the developer of Senua, as major layoffs commence. Xbox spins off four studios, which includes Ninja Theory, the developer of Senua, as major layoffs commence.

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Xbox spins off four studios, which includes Ninja Theory, the developer of Senua, as major layoffs commence.

Xbox plans to eliminate 3,200 positions, and Ninja Theory, Undead Labs, Compulsion Games, and Double Fine Productions will be departing from the Xbox Games Studio umbrella.