And there it is. Early this morning, an email was sent out to Xbox employees outlining the company’s plan for a massive reorganization that CEO Asha Sharma called “the most significant restructure in Xbox history.” In addition to bone-cutting layoffs, the move will see Compulsion Games and Double Fine spun off to become independent studios. Meanwhile, Ninja Theory and Undead Labs will part with the company to come under new ownership with a bunch of cash to keep development going on their respective in-development games, Senua and State of Decay 3.
“Our business is not healthy,” Sharma wrote, as she outlined how Xbox has overspent and underdelivered. “As that happened, our core business weakened, and we added more teams, more investment, and more time, hoping for a better outcome.” There’s something massively disheartening in finally hearing what has been known for several years now. It’s the worst kind of “I told you so,” because it was all so avoidable. An Xbox more focused on sustainability and longevity over “number go up forever and ever” would not have bought Activision Blizzard for $70 billion or disincentivized players from buying their biggest, most expensive-to-develop games by sticking them on Game Pass. But what does it say about the gaming community’s collective trauma over the last five abysmal years that the reactions to Xbox spinning off several of its studios while laying off 3,200 souls include a grim and resigned relief?
While I am sad for those laid off (especially in this horrid economy) there is at least one silver lining.
All of those studios we feared closing are going to be fine. 2 are now independent, 2 are sold off and Arkane is in negotiations.
Not the bloodbath we all feared. https://t.co/WWIgABYkn5
— TheImpureKing (@_TheImpureKing_) July 6, 2026
A close read of Sharma’s email reveals another infuriating point. “We are operating at margins that are 3-10x lower than comparable platform and publishing businesses,” she writes, seeming to imply that Xbox isn’t losing money, it’s just not making enough of it.
The most sickening thing about all this is that it seems that the leadership at Xbox has learned nothing from any of this. In the email, Sharma wrote that Xbox wants to reach 1 billion players a day. Billion with a fucking “B”. But as many have pointed out: With what games, Microsoft? With what people to make the games? With what interest to buy the games amidst a BDS boycott and several years’ worth of declining reputation and quality driven by this exact kind of decision making?
But what’s even worse is the feeling that none of this will work. It’s easy to imagine that in a year from now, there will be reports of yet more layoffs because the cadence of such news has been consistent ever since Xbox acquired Activision Blizzard.
Xbox feels less like a gaming company and more like a purgatorial waiting room for games and their developers. Sharma’s email said this is meant to be a “reset”, but I don’t think the company will be able to turn back on.
