Xbox Plans Layoffs Starting July 6, Weighs Closing at Least Five Studios Including Arkane

Since Microsoft's ongoing wave of gaming-sector reductions, the scope of what's coming has grown considerably. According to The Verge's Tom Warren, who covers Microsoft and cited sources familiar with the company's plans, Xbox is preparing layoffs set to begin July 6 that will hit most parts of the gaming division.

The rumors putting the job-loss count at 1,000 or more are unconfirmed, but Warren reports that five studio closures alone would affect at least 500 employees before the broader cuts touch the rest of the organization.

Blade May Never Ship

The most notable casualty under consideration: Marvel's Blade, the action game being developed by France-based Arkane Studios, the team behind the critically praised Dishonored series. The Verge reports the game was originally supposed to debut later this year, but the internal ship date has slipped to late 2027 and the project is over budget.

Microsoft is weighing canceling Blade outright. It's also exploring a sale of Arkane itself — meaning the studio could survive under new ownership, but that outcome is far from certain.

Multiple Studios in Limbo

Arkane is not alone. Bloomberg reported earlier this month that Microsoft is attempting to spin off Compulsion Games (developers of South of Midnight), Double Fine, and Ninja Theory. GamesBeat reported this week that Microsoft is actively seeking a buyer for Undead Labs, the studio behind the State of Decay franchise.

The situations vary in urgency. According to The Verge, Compulsion Games employees have already been told informally to start looking for new jobs, with closure seen as imminent inside the studio. Ninja Theory staff were informed earlier this month that Microsoft wants to either close or spin off the UK-based developer.

If buyers are found for any of these studios, closure is off the table. But sources told The Verge those negotiations could drag on for months.

The Case for the Restructuring

The strongest argument Microsoft can make here is straightforward: the Xbox gaming division has been burning money on a sprawling studio portfolio, and several of those studios have not delivered commercially viable titles. Blade was behind schedule and over budget. South of Midnight launched to modest sales. Consolidating or spinning off studios that haven't found a profitable product-market fit is a defensible business decision.

New Xbox CEO Asha Sharma, who took over the division this year, has been blunt about the financial picture. She said last month the division is not healthy and that she is focused on "making hard choices," while also insisting her goal is for Xbox to become "the number one gaming and entertainment company."

What the Workers Are Facing

The counterargument deserves a fair hearing. Studios like Arkane and Ninja Theory built genuine, loyal audiences and produced games critics recognized as inventive and well-crafted. These are studios whose creative work earned recognition. Their commercial returns didn't satisfy a corporate parent managing a balance sheet under pressure.

Employees at these studios are skilled game developers who built their careers around specific creative cultures. A spin-off sale is the better outcome; closure means those cultures dissolve and hundreds of specialized jobs disappear.

What Happens Next

The layoffs are reported to begin July 6. Whether Blade gets officially canceled, whether Arkane finds a buyer, and how many of the five studios under review actually close versus get sold are all unresolved as of June 30. Studio sale negotiations, according to sources speaking to The Verge, could take months in some cases, meaning workers at Compulsion, Ninja Theory, Double Fine, Undead Labs, and Arkane may be in limbo well into the fall.