Xbox Layoffs: Asha Sharma’s Reset May Bring More Job Cuts

Microsoft’s Xbox division is facing renewed uncertainty as reports suggest the company is preparing for three more rounds of layoffs in the coming months. The reported job cuts are part of a broader effort led by Xbox CEO Asha Sharma to address what she has described internally as an “unhealthy” gaming business and rethink how the division operates.

According to a report by Fortune, further layoffs are expected in November 2026 and January 2027, although the number of employees who could be affected has not been disclosed. The reports have added to concerns among Xbox workers following several rounds of job cuts across Microsoft’s gaming operations.

Sharma, who took over as Xbox CEO in February 2026, is reportedly reviewing the business’s spending, management structure and studio organisation. The restructuring extends beyond employee reductions, with Microsoft also seeking to reduce expenditure on external vendors and remove layers of management.

The reported changes come at a difficult time for Microsoft’s gaming division, which has experienced repeated workforce reductions over the past several years. Employees are now facing questions about the scale of the next round of cuts, the future of individual studios and how the changes could affect Xbox’s longer-term strategy.

Why Is Xbox Planning More Layoffs?

The reported layoffs are part of a wider restructuring intended to improve Xbox’s financial performance and refocus its investments. Sharma has argued that the gaming business expanded into too many areas without delivering the results Microsoft expected.

In an internal message to employees in July, Sharma described Xbox’s business as unhealthy and acknowledged that previous investments and strategic decisions had not produced the desired outcomes. She said the company had spread its resources too thin instead of concentrating sufficiently on its core business.

The changes reflect a broader effort to make Xbox more financially disciplined. Microsoft is reviewing spending, reducing management layers and directing resources towards areas it considers strategically important. The company is also rethinking how its gaming studios operate and how it allocates funding across its portfolio.

Xbox’s challenges extend beyond its workforce expenses. According to figures cited in Fortune’s earlier reporting, Microsoft’s gaming revenue declined by 7% in a recent quarter, with Xbox hardware revenue falling 33% and content and services revenue declining 5%.

These figures highlight the pressure facing the business as it attempts to strengthen its position in a competitive gaming market. Xbox competes with Sony’s PlayStation and Nintendo’s consoles, while also operating across PC gaming, subscriptions and digital content.

The restructuring suggests that Microsoft wants to align spending more closely with its strongest products and commercial opportunities. However, whether the changes will improve performance remains uncertain, and reducing costs does not automatically guarantee higher revenue or a stronger position against competitors.

Three Reported Layoff Rounds: October, November and January

According to Fortune’s October 20 report, Xbox is preparing for three additional rounds of layoffs scheduled for October 2026, November 2026 and January 2027. People familiar with the plans told the publication about the expected timing, although the plans could change.

The reported schedule means employees could face several rounds of job cuts over a period of months rather than a single restructuring announcement. The number of positions that could be eliminated in each round has not been disclosed.

The uncertainty is particularly difficult for workers who have already experienced layoffs or are concerned that their roles could be affected in the future. When job reductions occur in multiple stages, employees may have to continue working without knowing whether their positions will survive the restructuring.

Fortune reported that some employees have felt demoralised by the extended process. The uncertainty also creates challenges for teams trying to maintain productivity and plan projects while the organisation’s structure continues to change.

Repeated workforce reductions can affect more than headcount. Departing employees may take with them technical expertise, knowledge of long-running projects and experience working with particular game engines or development tools. Remaining teams may then have to adjust responsibilities and schedules.

For a business that develops games over several years, retaining experienced developers and maintaining continuity can be important. The effect of further cuts will depend on which roles are eliminated, how responsibilities are redistributed and whether projects receive adequate staffing.

Microsoft has not publicly confirmed the exact number of employees who could be affected by the newly reported rounds. The October, November and January schedule should therefore be treated as reported plans rather than a final, company-confirmed timetable.

How Many Xbox Employees Have Already Lost Their Jobs?

The latest reported plans follow a major restructuring announced in July 2026. At the time, Sharma told employees that Microsoft intended to reduce Xbox’s workforce by approximately 3,200 positions during its 2027 financial year.

The announcement included around 1,600 immediate job eliminations, with further reductions planned over the following months. The company described the changes as part of a fundamental reset of how Xbox operates and invests.

Fortune’s October report said 1,868 employees had been cut so far under the plan, while the overall target remained approximately 3,200 positions during the financial year.

Another reported reduction affected around 260 employees in September. The latest figures illustrate how the restructuring has continued beyond the initial July announcement, although the exact timing and scope of future cuts remain uncertain.

The workforce changes also form part of a longer period of upheaval across Microsoft’s gaming operations. The supplied report puts the number of gaming jobs cut over the past three years at approximately 5,750, reflecting the cumulative impact of multiple restructuring decisions.

These figures should be distinguished from Microsoft’s wider company-wide layoffs, which also affect employees outside the gaming division. The 3,200-job target announced for Xbox is a specific restructuring plan, rather than the total number of employees affected across Microsoft.

The scale of the changes makes the restructuring particularly consequential for Xbox’s development teams and publishing operations. How effectively the division manages the transition will depend partly on whether it can reduce costs without undermining the development and support of its games.

Xbox Is Changing How Its Game Studios Operate

Workforce reductions are only one part of Microsoft’s restructuring. The company is also changing its relationship with several game studios as it reassesses which businesses should remain within Xbox and which may operate under different ownership or management arrangements.

According to Microsoft’s July announcement, Compulsion Games and Double Fine Productions are set to return to independent management, retaining their intellectual property, game catalogues and resources to support their future projects.

Ninja Theory and Undead Labs, meanwhile, entered arrangements to join new ownership, with funding intended to support the development and growth of projects associated with the studios. Microsoft also said Arkane’s management in France was beginning consultations to consider possible strategic options.

These changes are different from simply closing every affected studio. The restructuring involves a mixture of organisational changes, potential transfers of ownership and decisions about where future investments should be directed.

The distinction matters because game studios often develop projects over several years. A change in ownership or management can affect funding, decision-making and publishing arrangements, but it does not necessarily mean that a studio’s existing projects will be cancelled.

Microsoft said in its July announcement that its publicly announced first-party games and projects were not being cancelled as part of those reductions. However, the longer-term effects of the restructuring will depend on the arrangements reached for individual studios and the resources available to complete their games.

For employees, studio changes can create uncertainty about future reporting structures, development priorities and job security. For players, the central questions concern whether games remain in development, who will publish them and whether the changes affect release plans.

Is Ninja Theory Facing Closure?

Speculation about the future of Ninja Theory has added to concerns surrounding the restructuring. The studio, known for the Hellblade series, has been mentioned in discussions about the future of Microsoft’s gaming portfolio.

However, Microsoft’s July announcement described Ninja Theory as one of the studios entering terms to join new ownership, with funding intended to support the completion and growth of its projects. That announcement did not state that the studio would simply be shut down.

The distinction is important because a transfer to new ownership and a full closure are different outcomes. A studio under new ownership may continue developing games, although its management, funding and relationship with Xbox could change.

The available information does not establish that Ninja Theory is scheduled to close entirely. Any claim that the studio will be shut down should therefore be treated cautiously unless supported by a confirmed announcement.

More broadly, Microsoft’s changes suggest that the company is reconsidering the structure of its studio portfolio rather than maintaining every operation in its existing form. For developers, this may mean new ownership arrangements or different funding models. For players, the eventual impact will depend on how individual studios continue their work.

Is Microsoft Planning to Sell the Xbox Business?

The scale of the layoffs and changes to Microsoft’s studios has fuelled speculation about whether the company could eventually sell or separate its Xbox business. Microsoft executives have rejected the suggestion that Sharma’s appointment signals an intention to sell the division.

Judson Althoff, a Microsoft executive, told Fortune that appointing Sharma to lead Xbox demonstrated the company’s commitment to the business. He praised her leadership and said the appointment should not be interpreted as evidence that Microsoft intends to sell its gaming operations.

Sharma has also directly addressed the speculation. In an interview with The New York Times, she stated: “Xbox is not for sale.”

These comments provide the company’s stated position, but they do not eliminate uncertainty about how Xbox will be organised in the future. The restructuring already involves significant changes to staffing, investment priorities and studio arrangements.

It is important to distinguish between a company restructuring a division and preparing to sell it. Businesses can reduce costs, transfer individual studios or revise their operating models while continuing to retain the wider operation.

Microsoft’s stated strategy is to improve Xbox’s performance and focus its resources more carefully. Whether that approach succeeds will depend on its ability to strengthen the business while continuing to deliver games, hardware and services that attract players.

Xbox’s Strategy Is Shifting Towards Its Core Business

Under Sharma, Xbox is placing greater emphasis on its core business and the commercial performance of its major franchises. The strategy follows years of expansion that included acquiring game publishers, growing the studio portfolio and building a subscription-focused business around Xbox Game Pass.

Those investments expanded Microsoft’s presence across the Gaming Industry, but they also increased the complexity of managing the business. Integrating studios with different development processes and commercial priorities can make it harder to allocate budgets and measure performance consistently.

Fortune’s reporting has highlighted concerns among current and former employees about strategic miscalculations and a loss of focus on the console business. The Xbox console remains an important part of Microsoft’s gaming operations, even as the company continues to serve players on PCs and other platforms.

Sharma’s approach involves directing resources towards areas with clearer commercial potential and asking studios to demonstrate stronger business cases for investment. This could make funding decisions more selective, particularly for smaller studios or projects that do not align with the company’s priorities.

The strategy presents a trade-off. Concentrating investment on established franchises could help Microsoft support major releases more consistently, but a narrower approach could also reduce opportunities for smaller or experimental games.

Success will depend on whether Xbox can balance financial discipline with the creativity and variety that help attract different audiences. Reducing costs may improve the business’s financial structure, but maintaining a compelling game portfolio remains essential to retaining players.

What Do the Layoffs Mean for Xbox Gamers?

For players, the immediate concern is whether the restructuring will affect upcoming games, studio output or the future of Xbox hardware. Microsoft has said its July workforce reductions were not intended to cancel publicly announced first-party games or projects, but the long-term impact of the broader changes remains uncertain.

Layoffs can affect development schedules when teams lose experienced staff or have to redistribute responsibilities. However, the effect varies by project, and the existence of job cuts alone does not establish that a particular game will be delayed or cancelled.

Changes to studio ownership may also alter how games are funded, marketed and released. Some studios could continue working on existing projects under new management, while others may need to adapt to different organisational arrangements.

Players will also be watching Microsoft’s decisions about subscriptions, console hardware and the availability of games across platforms. These areas are connected to the company’s broader effort to make Xbox more financially sustainable while preserving its appeal to consumers.

For now, there is no confirmed list of games that will be cancelled or delayed as a direct result of the newly reported layoff rounds. Players should look for official announcements from Microsoft and the relevant studios before drawing conclusions about individual releases.

Xbox Is Still Working on Future Gaming Hardware

Despite the restructuring, Microsoft continues to invest in future Xbox hardware. Reports cited by The Verge indicate that the company is working towards a new handheld gaming device in 2027, followed by a next-generation home console known as Project Helix in 2028.

The reported hardware plans suggest that Microsoft is not abandoning its console business as it reduces costs and changes its studio portfolio. Instead, the company appears to be pursuing a more focused approach to its gaming platform while considering how players use Xbox across different devices.

The handheld device could expand Xbox’s presence in portable gaming, a category that has attracted attention from hardware makers and players seeking more flexibility than traditional home consoles provide. However, the precise product plans, specifications and commercial arrangements remain subject to further announcements.

Project Helix is the reported codename for Microsoft’s next-generation home console. Its eventual success will depend on factors including performance, price, game availability and the value it offers compared with competing systems.

These hardware ambitions also underline the financial challenge facing Sharma. Developing new devices requires substantial investment, even as the company attempts to lower operating costs and prioritise projects with clearer commercial prospects.

There is no guarantee that planned hardware launches will offset the effects of restructuring or improve Xbox’s market position. The company will need to deliver products that appeal to consumers while maintaining a sustainable approach to development and manufacturing.

What Happens Next for Asha Sharma and Xbox?

The coming months will be important for Microsoft’s gaming division as the reported October, November and January layoff rounds approach. Employees are waiting for clearer information about the timing and scale of further cuts, while the company continues to reorganise its operations.

Microsoft’s ability to manage the transition will be measured not only by the savings it achieves but also by its capacity to maintain development schedules, support major franchises and deliver a strong hardware and software portfolio.

Further announcements could clarify the future of individual studios and the roles affected by the restructuring. Until then, the exact number of additional job losses and their distribution across Microsoft’s gaming operations remain uncertain.

The broader challenge for Sharma is to demonstrate that a more focused business model can improve Xbox’s financial performance without weakening the creative teams and products that sustain the brand.

For employees, the immediate concern remains job security amid repeated rounds of cuts. For gamers, the key questions are whether their favourite franchises will continue to receive investment and whether Xbox can deliver its planned hardware and software roadmap.

Microsoft has publicly rejected speculation that Xbox is for sale and has outlined plans to continue investing in gaming. Whether Sharma’s reset delivers the intended results will become clearer as the restructuring progresses and the company provides more information about its workforce, studios and future products.