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Microsoft is selling off four Xbox studios as part of significant gaming cuts
Double Fine and Compulsion Games are going independent, and Microsoft is also selling Ninja Theory and Undead Labs.
Double Fine and Compulsion Games are going independent, and Microsoft is also selling Ninja Theory and Undead Labs.
byTom Warren
Jul 6, 2026, 9:31 AM EDT
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_Xbox CEO Asha Sharma at the Bloomberg Tech conference in June 2026._Bloomberg via Getty Images
Tom Warrenis a senior correspondent and author of Notepad, who has been covering all things Microsoft, PC, and tech for over 20 years.
Microsoft is laying off 4,800 employees today, and more than 30 percent of the job losses are in the company’s Xbox division. The significant gaming cuts will affect nearly every part of Xbox and also involve four game studios being spun off to be run independently from Microsoft.
Today’s layoffs, which are being described as an Xbox “reset” moment, will impact around 1,600 Xbox employees, according to an internal memo from Xbox CEO Asha Sharma. The cuts won’t end today though, as Microsoft is planning to eliminate a total of around 20 percent of Xbox jobs by the end of the financial year in July 2027.
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Double Fine and Compulsion Games are returning to their founders, so Tim Schafer will take Double Fine back to independence along with Guillaume Provost making Compulsion Games an indie game studio again. Ninja Theory, the makers of Hellblade, and Undead Labs, the developers behind State of Decay, are also being sold, with agreements in place to ensure Senua and State of Decay 3 continue to ship.
“I recognize that a year-long restructuring creates additional challenges. Unfortunately, it is not possible to make all the necessary changes in a single day, and I wanted to be direct about the scale,” says Sharma. “I know this is painful. These changes will directly affect people who have poured their creativity into building Xbox. Many joined us through acquisitions, while others were recruited here, or sought us out because they loved this industry and loved Xbox.
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