Xbox CEO Asha Sharma Announces Massive Business Reorganization Including 3200 Layoffs and the Sale of Key Studios to Fix Operating Margins
Xbox is undergoing the most radical overhaul in its history. In an email to all staff, Xbox CEO Asha Sharma announced that the business would cut 3200 jobs over the FY27 financial year, beginning with 1600 layoffs alongside the sale of four key studios. According to Sharma, operating margins were three to ten times worse than rival platform and publishing firms, prompting the company to undertake revolutionary change Our business today is not healthy.
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This is an important email I sent today to all employees at XBOX:
— ASHA (@asha_shar) July 6, 2026
Team,
We are beginning the most significant restructure in XBOX history. After careful consideration, I've made the difficult decision to reduce our team by approximately 3,200 throughout FY27. This will include…
The problems are due to a slide in the hardware installed base at the start of this console generation, high operating costs, and sluggish growth for Game Pass and multi platform franchises. Sharma cited a grave imbalance in operating margins as the primary reason for the overhaul currently underway at Xbox.
Sharma noted that The entire content portfolio and platform architecture must be reset. As part of this shift, Compulsion Games and Double Fine Productions will be sold and return to independent status, taking their intellectual property and titles with them. Ninja Theory and Undead Labs have agreed to sell to a new owner with cash on hand to complete development on Senua and State of Decay 3. Additionally, the French management team at Arkane will undergo a formal consultation process regarding job numbers.
Internal cuts will affect Activision Blizzard, Mojang, King, and ZeniMax. However, Sharma confirmed that no game currently in development or announced is being axed. A major structural change means that Mojang and King, which hold the largest monthly user bases, will be managed directly by the CEO as a platform rather than a software house, each with their own profit and loss accountability.
Platform teams that grew 40 percent larger since the launch of current consoles are being streamlined, even as play time trends downward. To speed up decision making, Sharma is simplifying management layers. Previously, a decision maker might have to navigate 14 different layers of management; this will be reduced to a maximum of five, and in some cases, only three.
The resulting leaner organization will focus on makers to build great content, player coaches to work alongside developers, and a handful of pick up and play individuals who are the ultimate owners of outcomes. Xbox promises to clean its codebase, cut vendor spending by 50 percent, and upgrade its delivery tools to remove artificial complexity.
Finally, Sharma is creating a new COO role to oversee Xbox content, platform, services, and hardware profit and loss. Former Head of Minecraft and Mojang Helen Chiang has been appointed to the role. She will work to unify the disparate business units under a rigorous operating model to ensure investment decisions are clear and justified. This comes as Dave McCarthy prepares to retire after 17 years with the developer.
Despite the scale of the cuts, Sharma maintained that Xbox is preparing for a larger creative future with significant planned investments for the upcoming fiscal year. She concluded her message with a warning regarding corporate complacency in a rapidly shifting entertainment landscape.
