Xbox cuts 3,200 jobs while acknowledging "severe hardware crisis"

The company will say goodbye to about 20% of its workforce, along with several studios.

By Drew Gillis  |  July 6, 2026 | 12:34pm
Image: Microsoft
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Xbox cuts 3,200 jobs while acknowledging

Not content to let PlayStation get all the bad press, Xbox kicked off the week by telling 3,200 of its employees that they’d be out of a job within the year. A memo shared with employees globally this morning (and reported by Aftermath) titled “Resetting XBOX” and credited to CEO Asha Sharma acknowledges, along with general slow growth, that the move was fueled partially by “the industry … facing the most severe hardware crisis in its history.” 1,600 people are out of a job as of today, while another 1,600 will be out of a job by the end of the fiscal year. This represents about 20% of the company’s workforce, according to Game File. 

In addition to the cuts to personnel, Xbox announced that four studios—Double Fine, Compulsion, Undead Labs, and Ninja Theory—have left the company to new management. Double Fine and Compulsion will become independent, while Undead Labs and Ninja Theory “have entered terms to join new ownership with funding to complete and grow Senua and State of Decay 3.” The new ownership is expected to be announced later this year, per Game File. French studio Arkane Lyon is also on the way out, but Xbox owner Microsoft hasn’t been able to explore future options before today due to French laws. 

The memo is fairly blunt about the problems facing Xbox. “Our business today is not healthy,” writes Sharma. “We are operating at margins that are 3-10x lower than comparable platform and publishing businesses,” the memo continues, adding that “in a typical year, we lost 64 cents for every dollar we invested.” Per Kotaku, May 2026 was Xbox’s worst month for hardware sales ever, and saw console prices rise 22% compared to the same time last year. 

 
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