Xbox is heading into another round of cuts, and this time a studio closure may be on the table.
Xbox CEO Asha Sharma sent a note to staff this week laying out some stark numbers: annual revenue has dropped nearly half a billion dollars over five years, hardware costs are up 4x since last year, and the studio system is, in her own words, "overextended." Significant layoffs are expected to follow next month, and sources suggest those cuts could extend to shutting down at least one unnamed Xbox studio, or restructuring the broader studio lineup.
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What Sharma's memo actually says
The internal note wasn't just a vague warning. Sharma pointed directly at the Xbox Showcase that took place last weekend, noting that "a reliable pipeline of first- and third-party exclusives and new IP are critical to our success." Her concern is that Xbox has "not adequately funded" its biggest franchises while spreading resources too thin across too many studios.
The phrase "reassess the balance" is doing a lot of heavy lifting here. Read between the lines and it's a direct signal that some studios are going to be deprioritized, restructured, or cut entirely.
A pattern that keeps repeating
The history here matters. In 2024, Xbox closed Arkane Austin (Redfall, Prey), Alpha Dog Games, and Tango Gameworks (Hi-Fi Rush), with Tango later rescued by Krafton. Last year, The Initiative, the Perfect Dark developer that spent years in development, was shut down entirely.
Each round of cuts came with similar language about refocusing priorities. Each time, studios that had games either in development or recently shipped ended up on the chopping block anyway. Tango Gameworks shipped Hi-Fi Rush to widespread acclaim and still got closed. That precedent is hard to ignore.
Who's in the Xbox stable right now
Xbox Game Studios currently includes The Coalition (Gears of War), Compulsion Games (South of Midnight), Double Fine (Kiln), Halo Studios, InXile (Clockwork Revolution), Mojang (Minecraft), Ninja Theory (Senua), Obsidian (Outer Worlds), Playground Games (Forza Horizon), Rare (Sea of Thieves), Turn 10 (Forza Motorsport), Undead Labs (State of Decay), and World's Edge (Age of Empires).
That's 13 studios. Some have major franchises with clear commercial upside. Others are working on projects that haven't shipped yet or are between releases. The key here is that Sharma's own memo frames the problem as too many studios pulling resources away from the franchises that actually move the needle.
For players invested in any of these games, you'll want to keep a close eye on what gets announced next month. If you're currently playing on Xbox hardware, check out our best settings guide for Battlefield REDSEC on Xbox to get the most out of your setup in the meantime.
The wider industry context
Xbox isn't operating in isolation. Ubisoft just announced the closure of its Winnipeg and Belgrade studios, with up to 380 job losses. Tens of thousands of roles have been cut across the games industry over the past two years. The market contraction is real, and platform holders are not immune.
What makes the Xbox situation distinct is the scale of its studio acquisition spree between 2018 and 2023, which brought in Bethesda, Activision Blizzard, and a string of smaller developers. Managing that many studios was always going to require either significant revenue growth or eventual consolidation. Revenue didn't grow. Consolidation appears to be the answer.
For more Xbox and gaming news as this situation develops, our guides hub has you covered across all platforms while the industry reshuffles.
