Xbox announces largest restructuring with 3,200 layoffs

Xbox has initiated its largest-ever corporate restructuring, announcing significant layoffs and studio divestments as its new leadership seeks to stabilize a business struggling with thin profits and a costly industry-wide hardware shortage. The Microsoft-owned gaming division began the process on Monday, July 6, 2026, by eliminating 1,600 positions, with plans to cut an additional 1,600 jobs throughout the coming fiscal year. The company also confirmed it is parting ways with several of its game development studios.

In a memo to employees, Xbox CEO Asha Sharma described the move as the most significant restructure in Xbox history, necessary to address a business model she characterized as unsustainable. Sharma pointed to operating margins that are three to ten times lower than comparable businesses and noted that Xbox’s revenue has declined by $500 million over the past five years, a period during which the company invested $20 billion, not including its nearly $70 billion acquisition of Activision Blizzard. She stated the core business has weakened despite that massive investment.

Sharma attributed the current crisis to a combination of strategic missteps and external...