In an internal letter sent to Xbox employees worldwide, Asha (CEO of Xbox) announced the largest restructuring in Xbox's history, outlining the company's plan to "reset Xbox" and return the business to long-term growth.
The restructuring includes approximately 3,200 positions being eliminated during FY27, including 1,600 layoffs immediately. Xbox is also reshaping its studio portfolio, with Compulsion Games and Double Fine Productions becoming independent again, while Ninja Theory and Undead Labs will transition to new ownership. Meanwhile, Arkane Studios is exploring strategic options in France.
In the letter, Asha said Xbox's current business model is unsustainable, citing profit margins 3–10 times lower than competitors, slower-than-expected growth from initiatives like Game Pass and multiplatform publishing, and what it describes as the gaming industry's worst hardware downturn. Despite major investments, Xbox says its core business has weakened.
To address these issues, Xbox plans to:
Refocus its game portfolio and support independent developers rather than owning more studios.
Simplify its organization by reducing management layers from as many as 14 down to a maximum of 5 (and ideally 3).
Cut vendor spending by 50%, streamline internal tools, and improve accountability.
Place Mojang Studios and King under direct executive oversight due to their scale and importance.
Create a new Chief Operating Officer role, promoting Helen Chiang to oversee content, hardware, platform, and services.
Acknowledge the retirement of Dave McCarthy after 17 years with the company.
Xbox emphasized that no publicly announced first-party games have been canceled as part of the restructuring and stated that it intends to continue investing heavily while becoming a leaner, more focused organization. Leadership says the goal is to return Xbox to growth in 2027 and position it for long-term success.
Read the full letter here
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