Xbox Layoffs Could Be the Largest in Gaming History as Studios Reportedly Fight Closure
That terrible time of year again.
Saying that things have been bleak in the gaming industry over the past few years would be an understatement. The industry saw nearly 15,000 layoffs in 2024, followed by more than 9,000 in 2025. Microsoft’s company-wide layoffs alone accounted for around 15,000 job cuts in 2025, and the trend does not appear to be slowing in 2026.
From Acquisition Spree to Mass Layoffs
Gaming publishers around the world, including Xbox, expected the surge in consumer spending seen during the COVID era to continue, but that never became a reality. Following major acquisitions such as Activision Blizzard and Bethesda, along with investments in several large studios during the early years of the Xbox Series X|S generation, Xbox appeared well positioned to compete more aggressively with Sony.
However, things have not gone as planned for the publisher, and reports now suggest that several Xbox studios are at risk of closure as the company faces another wave of significant layoffs.
According to Jason Schreier, several major studios, including Ninja Theory, Compulsion Games, and Double Fine, are currently at risk of closure and are actively negotiating with Microsoft in an effort to avoid that outcome. Whether that means finding a new owner for the studios or spinning off independently, the outcome is unlikely to be pleasant, as layoffs are expected either way. No major publisher is likely to take on an entire existing team without significant cuts.
Duke Nukem co-creator George Broussard, known for his connections with insiders across the gaming industry, recently commented on the situation on X, stating that if the information he has received is accurate, “this will likely be the largest single layoff event in gaming history.” He also said that studios that remain open are still expected to see layoffs. If true, this means we’re potentially looking at not only studio closures but layoffs across much of the Xbox Game Studios portfolio.
Another troubling report from Dean Takahashi at GameBeat, later corroborated by Jez Corden at Windows Central, claims that Undead Labs, which is currently developing State of Decay 3, is also at risk of closure and that the game could be canceled. All of this comes after Xbox closed The Initiative last year and canceled Perfect Dark, ZeniMax’s unannounced MMO, and Everwild.
These layoffs are expected to take place shortly after the end of Microsoft’s fiscal year, meaning they could begin in early July based on prior dates.
You can point to many reasons why Xbox finds itself in this position, but at the end of the day, the talented developers at its studios are the ones bearing the brunt of the company’s decisions over the past decade. One can only hope that whatever negotiations are taking place lead to some measure of stability for those developers because the way insiders are describing these layoffs paints a deeply troubling picture for the future of Xbox and everyone involved.
