In a nutshell

• Xbox announces a major reset strategy to refocus on studios, services, and players.
• Several studios will restructure or spin off, with leadership changes across the division.
• Xbox sets a bold target of 1 billion daily players per day.

Microsoft has revealed a sweeping new initiative titled “Resetting Xbox”, signaling a major shift in how the division will operate moving forward.

The announcement outlines a combination of studio restructuring, leadership changes, and a renewed focus on multiplatform releases, aimed at strengthening Xbox’s long‑term position in the gaming industry.

Studio Changes and Leadership Updates

Several Xbox Game Studios are set to undergo restructuring, with some exploring independence while others will be consolidated under new leadership. The move comes after months of speculation about closures and layoffs, with Microsoft confirming that the reset is designed to ensure sustainability and creative freedom for developers.

Double Fine Productions (Keeper) and Compulsion Games (South of Midnight) will return to independence, with Microsoft providing initial runway funding to kickstart their next projects while they secure additional financing. Both studios will retain ownership of their IP and back catalog.

Meanwhile, Ninja Theory (Hellblade) and Undead Labs (State of Decay), which require larger financial backing, have secured new owners, though the deals are still pending; their upcoming titles, Senua and State of Decay 3, remain on track for release next year.

In addition, Arkane Lyon (Dishonored) has now entered the same transition process, with Microsoft hoping to avoid the studio’s closure.

Xbox has also named Helen Chiang, former head of the Minecraft business, as its new Chief Operating Officer, marking a key leadership change for the division. At the same time, Dave McCarthy, corporate vice president of Xbox product services, is retiring after 17 years with the company.

In her letter, CEO Asha Sharma emphasized her ambition to dramatically expand Xbox’s reach, setting a bold target of 1 billion daily players, compared to the current 500 million monthly users.

Layoffs

Microsoft has confirmed that 3,200 job cuts are planned across the entire Xbox division, affecting both first‑party developers and wider business teams. While some studios will see minimal impact, others face deeper reductions, though Microsoft has not specified which will be hardest hit.

One area set to take a significant blow is the Xbox platform team, which covers hardware, software services, xCloud, and Game Pass. The company says these layoffs are intended to streamline operations and improve agility.

The cuts will roll out in two phases: around 1,600 redundancies effective immediately, followed by another 1,600 before the end of Microsoft’s 2027 fiscal year (June 30, 2027), a figure that also includes the divested studios.