Xbox wants to entertain a billion people every day. It plans to do that with a team that keeps getting smaller. That math doesn't add up.
And Asha Sharma, Xbox's new CEO, knows it. On Monday, Sharma called the latest round of cuts "the most significant restructure in Xbox history." The numbers are brutal: 1,600 employees laid off this summer, another 1,600 expected over the next year, bringing total reductions to roughly 3,200 people through the 2027 fiscal year.
Microsoft has shed about 4% of its total workforce across multiple divisions, including 6,000 cuts in May 2025 and 9,000 in July 2025. The layoffs hit hardest at the studios Xbox spent years acquiring. Double Fine, Compulsion Games, Undead Labs, and Ninja Theory are being spun out as independent developers.
Arkane Studios is in negotiations with the French Work Council for a sale. These were teams Microsoft bought primarily to feed Game Pass. Now they're being cut loose. Sharma's internal memo, posted on X, acknowledged the damage. "In a typical year, we lost 64 cents for every dollar we invested," she wrote.
The Guardian reported that excluding Activision Blizzard King, Microsoft spent over $20 billion on content, platform, and hardware subsidies over five years while annual revenue declined by nearly half a billion. The stated goal is a shift toward "games with larger audiences." Sharma said the remaining teams will "focus on higher priority projects."
That means Halo, Gears of War, Minecraft, and Candy Crush. It means Helen Chiang, who previously ran the Minecraft franchise, was promoted to chief operating officer reporting directly to Sharma.
"Mojang and King will now directly report to me," Sharma wrote. The math problem is simple. King's games attract roughly 200 million monthly players.
Amazon says 100 million people watched the first season of Fallout on TV. Even combining every Xbox touchpoint, a billion daily users is a stretch that Sharma herself acknowledged would require expansion into China and emerging markets like India.
"I want Xbox to be one of the few companies that entertains more than a billion people each day and gives everyone the opportunity to create and connect," Sharma wrote. The cuts extend beyond the studios being sold off. Bethesda, id Software, and Obsidian are also seeing reductions.
Craig Duncan, head of Xbox Games Studios, and chief of staff Louise O'Connor have both resigned.
Former Xbox executive Peter Moore, speaking on the BBC, noted the industry is in a period of profound change as Microsoft's cuts echo across gaming. The company that Bill Gates launched in March 2000 with a promise to be "the platform of choice for the best and most creative game developers in the world" is now shedding those same developers at a historic pace.
Xbox spent billions acquiring Bethesda and Activision Blizzard. It shut Arkane Austin and Tango Gameworks in 2024.
It cut 9,000 jobs in 2025. Now it's losing four more studios and thousands more employees.
"These changes are about a bigger future for Xbox, not a smaller one," Sharma wrote. With a shrinking team, a narrower creative focus, and a billion-person target that no major gaming platform has ever hit, that claim is getting harder to believe by the day.
