Microsoft cuts 3,200 Xbox jobs, spins off four studios in major layoffs

Microsoft laid off 4,800 employees Monday, with more than 30 percent of the cuts in its Xbox division, according to an internal email reviewed by IGN.

The reductions, described internally as an Xbox "reset," will affect roughly 1,600 employees immediately, with the company planning to eliminate about 20 percent of Xbox jobs by the end of its 2027 fiscal year.

As part of the shakeup, four studios are being spun off from Microsoft. Double Fine and Compulsion Games are returning to independent ownership under founders Tim Schafer and Guillaume Provost, respectively, while Ninja Theory and Undead Labs are being sold to new owners, with commitments in place to continue development on their respective titles, Senua and State of Decay 3.

In an internal memo obtained by IGN, Xbox CEO Asha Sharma said the division's business "is not healthy," citing profit margins that are far below those of comparable platform and publishing companies. Sharma noted that Xbox lost 64 cents for every dollar invested in a typical year and pointed to oversaturation in the games market as a factor in the strategic pullback.

The memo also confirmed additional layoffs across Activision, Bethesda/ZeniMax, Blizzard, King, and Mojang, though Sharma said no first-party announced games are being canceled. As part of a broader management shakeup, Mojang and King will now report directly to Sharma, and Helen Chiang has been named Xbox's first Chief Operating Officer.

IGN, which is owned also reported that Microsoft is weighing the sale or closure of Arkane Studios, which has been developing the delayed, over-budget title Blade. According to the outlet, French labor consultations over Arkane's future could take months.

(Disclosure: IGN and Mashable are both owned by the same parent company, Ziff Davis.)