Xbox to Lay Off 3,200 Employees and Sell Four Game Studios—Announces Sarah Sharma

Microsoft's gaming division Xbox announced on July 6, 2026 a layoff of approximately 3,200 employees, or about 20% of its workforce, as part of a major restructuring amid weak performance in the gaming business. At the same time, the company is selling four game development studios and beginning the process of parting with a fifth.

What Xbox leadership said

Xbox CEO Asha Sharma in a memo to employees sent Monday morning, July 6, 2026, wrote: "Our business today is unhealthy." According to her, the division is operating with profitability margins three to ten times lower than comparable companies in the industry. From this came the task she set for the team: "We must restart Xbox."

"Our business today is unhealthy," —

Asha Sharma, Xbox CEO, in a memo to employees on July 6, 2026.

• The layoff will affect approximately 3,200 people — about 20% of Xbox's workforce
• The restructuring was announced on July 6, 2026
• The company is selling four game development studios and preparing to part with a fifth
• The division's profit margins, according to Sharma, are 3-10 times lower than comparable companies

What's happening to the studios?

Beyond the layoffs, Xbox is beginning to sell off part of its studio structure: four game development studios are moving to new owners or closing, and the company has already begun the process of parting with one more, a fifth studio. Formally, this is part of the same restructuring that Sharma describes as a response to weak financial performance in the gaming direction — the workforce reduction goes hand in hand with a reduction in the portfolio of owned studios.

Discussion of the news on Bloomberg TV was led by technology reporter Brody Ford together with hosts Paul Sweeney and Scarlett Fu — they noted that the restructuring affects not only the workforce but the entire structure of Microsoft's gaming business.

What this means

Xbox remains a major player in the console market and subscription gaming services, but the CEO's public acknowledgment of unhealthy margins and the decision to cut a fifth of the workforce along with selling studios signal that Microsoft is willing to cut costs in the gaming direction as harshly as in other non-core businesses — instead of targeted adjustments, the company is restructuring the very structure of the division.