Microsoft is cutting 3,200 jobs across its Xbox division — roughly 20% of headcount — by June 30, 2027, with 1,600 departures effective immediately. The figure comes from a July 6 internal letter by Xbox head Asha Sharma, reviewed by Game File and The Wall Street Journal.

The cuts anchor a structural reset Sharma tied to a specific diagnosis: Xbox is "3-9 times" less profitable than comparable platforms and loses an average of 64 cents on every dollar invested in games, according to the memo. Microsoft is not canceling any previously announced title, Sharma said, but it will redirect spending toward priority projects.

Which studios are leaving Microsoft?

Four Microsoft-owned studios will exit or change hands:

• Compulsion Games and Double Fine Productions have regained independence, retaining their intellectual property and receiving severance to bridge them through a publisher or investor search.
• Ninja Theory and Undead Labs will transfer to undisclosed buyers, with Microsoft continuing to fund ongoing development of the Senua franchise and State of Decay 3.
• Arkane Lyon's future remains under consultation. French labor rules block a fast divestiture, and a decision on Marvel's Blade — its in-development project — could take months.

How will Xbox's management change?

Management layers fall by an order of magnitude. Sharma puts the current count at 14; the target is 3 to 5. A new Chief Operating Officer role will own P&L across content, hardware, platforms and services. Helen Chiang, previously vice president of Minecraft franchise development, takes the post.

Mojang Studios (Minecraft) and King (Candy Crush) will now report directly to Sharma. Both pull the largest daily active audiences inside the Xbox ecosystem. Sharma told staff Microsoft has invested roughly five times less in Minecraft than Roblox has poured into its platform, per Game File.

Operational targets include halving supplier spend and consolidating technical tools and services across the division.

What does the restructuring say about Game Pass?

Game Pass has not delivered the growth Microsoft wanted. Sharma declined to disclose subscriber data, but The Wall Street Journal reports the service at 30 million subscribers — down from the 34 million cited in February 2024, and well below the 100 million target Microsoft set for 2030.

Microsoft is not shutting down the subscription, per people familiar with the plans. Sharma instead framed it as one element of a multi-platform, broad-portfolio strategy that strengthened the business without producing the growth rate leadership expected.

What is Xbox targeting next?

The headline ambition is operational: scale Xbox's total daily active audience to one billion players. The current combined DAU across Microsoft-owned games, platforms and services is undisclosed, but the internal benchmark includes Mojang's and King's mobile user bases.

For studios, three operational tracks follow from the memo:

• Vendor and middleware costs will tighten, with supplier spend slated for a 50% reduction.
• Decision-making should compress as management layers fall — relevant for developers working through publishing deals or co-development agreements.
• Multi-platform parity and Game Pass economics remain under review, signaling continued scrutiny of exclusivity arrangements.

The watch items for the next fiscal cycle: the Arkane Lyon consultation outcome, the eventual disclosure of the Ninja Theory and Undead Labs buyers, and any concrete milestone Microsoft files against the one billion DAU target.