Xbox has seen some huge changes this year, and the biggest upheaval of 2026 so far has come in the form of mass redundancies and shocking restructuring efforts. The last few years have been really rocky for Xbox, and the company's plans to cut 1,600 jobs immediately (and a total of 3,200 within the next year) put a huge spotlight on the malaise the company is in. Mass layoffs are devastating in any industry, and the company-wide memo sent out to employees and shared via Twitter even resulted in Xbox being too consequential for gaming. other platforms and to grow its game portfolio to the point of bloat.
Ever since Phil Spencer and his expected successor, Sarah Bond, stepped away from the company in early 2026, new Xbox CEO Asha Sharma has been making big swings that have mostly been seen as positive. Lowering the price of Game Pass Ultimate and assuring players that Xbox will return to exclusivity has been praised, but this move to “reset” is her first truly controversial decision.
Asha Sharma's restructuring memo highlights a festering wound that Xbox has tried to hide for years
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Image via Microsoft -
Image via Xbox -
Image via Microsoft
Basically, Sharma's official statement regarding the planned changes acknowledges that Xbox has been trying to bite off way more than it can chew for a long time. Controversial moves like Xbox's infamous Activision Blizzard acquisition caused a significant amount of legal drama, while taking over a mix of AAA and indie studios proved to be too much on the company's plate.
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Xbox's attempt to be everything at once ultimately backfired
There is one specific quote from Sharma's memo that really stuck with me. She says, “We know great technology gets better when it gets simpler, not bigger.” This quote alone is a good summary of what these restructuring efforts are trying to accomplish. Xbox was growing at a rate that just didn't make sense when compared to the shrinking player base. The mass layoffs at Xbox affect an outrageous number of people, but layoffs wouldn't have even needed to happen in the first place if previous Xbox leadership hadn't tried to overstretch their resources.
We know that great technology gets better when it gets simpler, not bigger. Today, work in some parts of the company goes 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 playing time have decreased. That complexity has slowed decisions, blurred accountability and made it harder for players to deliver. When restoring XBOX we will simplify.
Instead of sticking to what made it so successful in the first place, Xbox lost sight of it. Trying to be a first-party juggernaut, third-party publisher, mobile powerhouse, PC standout, and home to indie studios might look like growth on paper, but it made Xbox's business far more complicated than it needed to be. The details of the Xbox cancellation are eye-opening, and it's incredibly sad that it got to the point where people's livelihoods had to be affected.
The Xbox portfolio will see some major changes, but it could be the necessary step forward for each studio involved
Prior to this announcement, Xbox was already expected to adopt layoffs this month. The question that remained unanswered until recently, however, is which studios specifically would be affected. Rumors suggested that smaller studios like Double Fine and Compulsion Games would shut down, but that is not the case. While Xbox exclusive franchises and large corporate owned IPs are prioritized, there is still hope for the smaller studios.
This is the fate of Xbox's smaller studios
- Double fine – Go back to an independent business
- Compulsion game – Go back to an independent business
- Ninja theory – Looking for new ownership
- Undead Labs – Looking for new ownership
- Arcane Lyon – To work with the French government to find a solution
There was a time not too long ago when Xbox would have simply shut down studios. Just last year, Xbox discontinued Perfectly dark reboot and also shut down its developer, The Initiative, in the process. Other studios such as Arkane Austin, Tango Gameworks (saved and bought by Krafton), and Alpha Dog Games (managed to go indie after originally closing) have all been victims of Xbox's past decisions to simply close studios instead of letting them go.
Xbox tried to fix its problems by adding more to its business, but it ended up being a bigger mess in the long run
Acquiring a huge portfolio, adding layers upon layers of management to the internal operations and increasing the company's ambitions instead of admitting that it was too much in the end. It's going to be incredibly difficult to fix, but scaling back Xbox and refocusing may be the necessary step for each studio involved moving forward. There's a chance that Double Fine and Compulsion Games could thrive even better as indie studios without Xbox's oversight, and Arkane Lyons Leaf The game can finally leave development hell if it can find a new path.
With anticipation around State of decay 3s release and the announcement of a new Hellblade game, Undead Labs and Ninja Theory hopefully won't have to look too hard for new ownership either. I want to remain optimistic for the sake of all employees who find themselves afloat in open water.
Trying to be a first-party juggernaut, third-party publisher, mobile powerhouse, PC standout, and home to indie studios might look like growth on paper, but it made Xbox's business far more complicated than it needed to be.
Now the main studios that will be seen are even closer to the Xbox's heavy hits. The coalition has it Gears of War: E-Day on the way, while Halo: Campaign Evolved is just around the corner. Of course there is too Call of Duty: Modern Warfare 4 set for October. However, one of Xbox's biggest potential money makers is taking a long time to produce anything significant for the company. Xbox and Bethesda have been together since 2021, and the latter has been slow to bring out the games that many of its longtime fans have wanted.
After Starfield didn't meet many of the players' expectations, the fans are hungry The Elder Scrolls 6 and Fallout 5. Xbox has made it clear that a large portion of these layoffs are intended to cut down on excessive management to streamline operations, and that could help Bethesda move forward. For now, all gamers can do is wait and see how Xbox's restructuring decision affects the company down the road.
