Xbox may close 5 studios in July layoffs, including Arkane, Compulsion, Ninja Theory and more

Xbox layoffs are said to begin July 6, and as many as five studios could be shut down with hundreds of layoffs and multiple product cancellations.

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Derek Strickland

Senior Gaming Editor

Published Jun 30, 2026 2:44 PM CDT

1 minute & 45 seconds read time

TL;DR: Microsoft plans major Xbox layoffs starting July 6, potentially closing or selling five studios-Compulsion Games, Undead Labs, Double Fine, Ninja Theory, and Arkane-due to poor performance and a low profit margin. Xbox aims to focus resources on key franchises like Fallout, Halo, Call of Duty, and The Elder Scrolls to improve competitiveness.

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Microsoft may close up to five Xbox studios as part of next month's brutal layoffs, sources tell The Verge's Tom Warren.

Xbox may close 5 studios in July layoffs, including Arkane, Compulsion, Ninja Theory and more 1

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Following years of underperformance, and a disastrous annual 3% profit margin, Microsoft is making extreme cuts to try to save its business. Gamers and fans just didn't know how bad things were at Xbox, but the new guard is exposing hard truths: Xbox has to change or die. High levels of cost cutting are expected, and reports say that Xbox may shut down, spin off, or sell five game studio groups in a mass layoff starting July 6--Compulsion Games, Undead Labs, Double Fine, Ninja Theory, and Arkane could be affected.

Sources tell The Verge's Tom Warren that these five game developers are being targeted in Microsoft's aggressive cost-cutting. There's been rumblings that the cuts will be a "bloodbath" for Xbox, and management has commented with a memo issued on June 10 that strongly indicates layoffs are part of Xbox's new process.

Read more: Xbox to hold major layoffs as profit margins drop to 3%

It's believed that Microsoft is open to various possibilities for these studios, including outright selling them, spinning them off as a separate group to be co-financed by outside partners, or even merging them together to form one unit.

Xbox's new leader has essentially said that the group has done a poor job picking where it invests money, saying that certain franchises need to be prioritized. Reports indicate that these IPs and series include Fallout, Halo, Call of Duty, and The Elder Scrolls--among others.

"We expanded our studio system when we needed a pipeline of content to meet multiple strategies across subscription, streaming and devices," Sharma said in the memo published June 10.

Frequently Asked Questions

Question 01

If one of the named studios is sold, will existing Xbox Game Pass contracts for their games likely transfer to the new owner?

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Question 02

How might potential studio closures affect the development timelines for ongoing projects from those five studios?

Studio closures would likely delay or halt ongoing projects as teams shrink, get spun off, sold, or merged, disrupting development continuity and resource allocation. The primary article says Microsoft may shut down, spin off, sell, or merge up to five studios, which could cause cancellations and hundreds of layoffs, meaning projects could be cancelled, put on hold, or see prolonged timelines due to loss of staff and changes in ownership.

Answered

Question 03

Could Microsoft merging multiple targeted studios into a single unit impact the staffing levels or roles for developers currently employed there?

Yes. The article says Microsoft may merge studios into one unit as an option, and that Xbox is planning mass layoffs affecting up to five studios with hundreds of job cuts. That plan implies potential changes to staffing levels and roles for developers, since closures, spins offs, sales, or mergers would alter employment status and team structure.

Answered

Question 04

If a studio is spun off and co-financed by outside partners, what changes to publishing or platform exclusivity for their future games should players expect?

If a studio is spun off and co-financed by outside partners, players should not expect guaranteed Xbox-only publishing or platform exclusivity for that studio's future games. The primary article says Microsoft is open to spinning studios off and co-financing with outside partners, which implies those studios could be published or financed outside Xbox's exclusive ecosystem. Related article "Report: Xbox exclusives being discussed internally at Microsoft, some form of game exclusivity may return" notes exclusivity talks are ongoing, suggesting any exclusivity would be decided case by case.

Answered

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"In the process, we have found ourselves over-extended as we executed on changing strategies in a landscape of more readily available content. We are the fortunate stewards of industry-defining franchises that have enormous potential and player demand, but we have not adequately funded them to compete and win."

Xbox may close 5 studios in July layoffs, including Arkane, Compulsion, Ninja Theory and more

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