In a nutshell

• Microsoft is reportedly planning to cancel Marvel’s Blade and shut down Arkane Studios.
• At least five Xbox studios could face closure or spinoffs amid cost‑cutting measures.
• Layoffs across Xbox are expected to begin July 6, potentially impacting over 1,000 employees.

Microsoft is preparing for a major restructuring of its Xbox division, with the company weighing the cancellation of Marvel’s Blade and the closure of Arkane Studios, the team behind Dishonored, according to a report from The Verge.

Blade Development Halted

Arkane’s Blade project, originally slated for release later this year, had slipped internally to late 2027 and was reportedly running over budget. Microsoft is now considering canceling the game entirely as part of sweeping cost‑cutting measures.

Xbox Studios at Risk

According to the report, Microsoft is evaluating the closure or spinoff of at least five studios, including Arkane. Other developers, such as Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Labs, are also in talks to secure buyers to avoid a shutdown.

A recent report from Jeff Grubb of GamesBeat reported that Undead Labs, the developer of State of Decay 3, is actively seeking a buyer to avoid a shutdown, with around 110 jobs on the line.

Layoffs Incoming

The restructuring is expected to begin with layoffs starting July 6, impacting most parts of Xbox. Sources suggest more than 1,000 jobs could be lost, with at least 500 employees affected if five studios are shuttered.

Xbox Reset Under New Leadership

Xbox CEO Asha Sharma has described the move as part of a “reset,” emphasizing the need to make “hard choices” to stabilize the business. While Sharma insists that the goal is to make them the “number one gaming and entertainment company,” the closures mark one of the most turbulent periods in the company’s history.