Microsoft has announced what it has called “the most significant restructure in Xbox history.” Xbox CEO Asha Sharma has confirmed 1,600 Xbox staff will lose their jobs today, with another 1,600 set to be cut during the current financial year. As part of that, four studios are leaving Microsoft, and one may be sold or closed if it doesn’t find a buyer.
There is a lot of news flooding in around the Xbox layoffs, including staff, studio, and game changes. We reported on it all right here. You can see all of the latest updates on the likes of State of Decay 3, Senua, Marvel’s Blade, and the many staff who are working on them.
Asha Sharma Talks Layoffs at Xbox: ‘We Simply Spread Ourselves Too Thin’
Xbox CEO Asha Sharma has offered follow-up comments regarding the layoffs across Microsoft’s gaming division.
Sharma further explained how the company got to where it is today during an interview with Fortune. As Xbox cuts 1,600 employees, with another 1,600 to follow in the year ahead, she says the company lost focus “on the core business.”
“In order to grow, we made a bunch of bets … and as we did that, we inherently didn’t focus on the core business,” Sharma said. “The number one measure of your strategy is what you put your resources behind, and we simply spread ourselves too thin.”
She continued, referencing the same hardware component crisis mentioned in her June “reset” memo: “A healthy Xbox could weather the shock of the hardware crisis. With an unhealthy Xbox, it becomes really challenging, and it accelerates a lot of the changes we need to make.”
“I think our core has to be healthy, and that will be necessary but not sufficient,” she added.
‘State of Decay 3 Is Still Coming’ — Undead Labs Issues a Statement
State of Decay developer Undead Labs took to its social media pages to post a statement following the news that it had begun transitioning out of Xbox.
The message promises that “State of Decay 3 is still coming.” Although it offers little in terms of new information, the developer seems confident in its future as it begins “a new chapter.” You can read the full statement below:
“Today, Undead Labs begins a new chapter. We’re transitioning out of Xbox and while we can’t share all the details just yet, we can tell you this: State of Decay 3 is still coming. The team is working hard and our commitment to this community has never been stronger. More news soon. Survivors stick together.”
Arkane Founder on the Studio’s Future: ‘How Much?’
As Arkane Studios’ future remains uncertain, its founder, Raphaël Colantonio, has teased he – or someone he knows – might be interested in a deal.
Amidst the confusion surrounding what today’s Xbox restructuring could mean for the studios it’s parting with, Arkane’s fate is the most up in the air. Options for its future have many suspecting it could be sold or shut down, but Colantonio is hoping for the former.
“Regarding Arkane… how much?” Colantonio said with a squinting-tongue emoji. “I’m asking for a friend.”
Regarding Arkane… how much? I’m asking for a friend 😝
— Raphael Colantonio (@rafcolantonio) July 6, 2026
It certainly seems to be a joke, and it at least shouldn’t be taken seriously. However, as fans of Arkane’s work hope to see it continue on, it’s a message that’s already being shared around.
Colantonio founded Arkane in 1999 and announced his departure in 2017. In 2019, he launched WolfEye Studios. The developer has since launched 2022’s Weird West, with a new action-RPG, which is said will make Dishonored and Prey fans “feel at home,” also in development.
Xbox Accessibility Team Impacted by Layoffs
The recently announced Microsoft layoffs appear to have impacted the Xbox accessibility team.
According to a ZeniMax Media senior user researcher’s now-deleted Bluesky post (reviewed by GameSpot), accessibility staff, including individuals on the Bethesda User Research Team, have been laid off. Accessibility test lead Zach Clothier announced his exit on LinkedIn.
The number of accessibility team members affected by today’s layoffs is unclear. Microsoft addressed these specific cuts in an email sent to GameSpot.
“Accessibility remains a priority for Xbox,” a representative for the company said. “While we’ve made changes across the team, creating more accessible gaming experiences for players has not changed.”
Game Pass Reportedly Down to 30 Million Subscribers
The Wall Street Journal has reported that Xbox Game Pass currently has 30 million subscribers.
It’s been some time since we’ve received a head count for Microsoft’s gaming subscription service. One report from February 2024 recorded Game Pass as having 34 million subscribers. An employee profile boasted 35 million subscribers as of June 2025, though that figure was never verified.
If the updated number is accurate, it would mean the service is down at least a few million subscribers from what was reported through the last few years. As noted by the Wall Street Journal, documents related to its Activision acquisition saw Microsoft hoping to reach 77 million subscribers by 2026. Xbox chief strategy officer Matthew Ball confirmed Game Pass lost “millions of subscribers” following steep price hikes from late 2025.
Head of ZeniMax Online Studios and Bethesda Game Studios email to staff
IGN has obtained the email Jill Braff, head of ZeniMax Online Studios and Bethesda Game Studios, sent to staff today following news of widespread layoffs at Xbox. While it doesn’t tell us much we didn’t already know, it reaffirms the idea that Bethesda, like the rest of Xbox, will double down on its biggest franchises.
Team, I want to acknowledge the changes taking place across XBOX, including here at Bethesda, where a number of our colleagues have been impacted. Today’s news affects people who have worked alongside us, inspired us, challenged us, and helped build the studios, games, and culture that define Bethesda. Across our global organization, some employees are leaving the company, while certain countries review strategic options through processes required by local law. While each situation is different, what they share is uncertainty for people in our community.
I want to express my sincere gratitude to everyone who has been impacted. Your talent, creativity, dedication, and contributions have helped shape Bethesda in meaningful ways, and our immediate focus is supporting you through this transition. I also know this news is difficult for many across our organization, whether you’re personally impacted, supporting a teammate, or simply trying to process what comes next.
The intent behind today’s announced changes is consistent with the broader direction for XBOX: creating greater focus, improving execution, and positioning our business for long-term success. These shifts also reflect the realities of our industry and business – and our responsibility to ensure Bethesda is operating from a more stable foundation. To be successful in the future, we need to change course. We must strengthen our business, return to sustainable growth, and ensure we can continue investing in our franchises and our players. I know that doesn’t make a day like today any easier.
As we look ahead, we will meaningfully evolve how we operate. For decades, Bethesda has organized its business around the individual roadmaps of our largely independent development studios, supported by centralized publishing and corporate teams. This model enabled us to create some of the industry’s most beloved franchises. However, rising player expectations, increasing development complexity, and a more competitive market have changed the economics of our industry.
To best position Bethesda for future growth, we are shifting from a planning model primarily centered on what’s next for each independent studio to one that focuses on our strongest franchises and determining the content roadmap that best serves our players and Bethesda as a whole. From there, we’ll align the right talent, technology, and resources across the organization to deliver on those priorities. By working more closely across the organization, sharing expertise and capabilities, and focusing our investments on the opportunities with the greatest potential, we believe we can better support our franchises and IP with meaningful long-term potential.
This does not change the importance of exceptional creative work, craftsmanship, and innovation – which is what makes Bethesda special. Our studios’ and teams’ identities, talent, and expertise remain essential to our success. What changes is how we align those strengths, bringing them together around our franchises and IP, to position Bethesda for long-term growth and continued investment in our future.
We will share more about our direction in the weeks and months ahead. But for today, my focus is on the people who have made – and those who will continue to make – Bethesda what it is. Please take care of one another. Reach out to a colleague. Offer support where you can and give people the space they may need as they process today’s news.
Even during a challenging time, I remain confident in what we can accomplish together. We have extraordinary talent, some of the most beloved franchises in our industry, and tremendous opportunities ahead. The work we are doing now is about ensuring we are positioned to realize that potential for years to come. Thank you for everything you do for Bethesda, our players, and each other.
State of Decay 3 doesn’t have to launch on Xbox Game Pass under new owners
Game File has reported that State of Decay 3 doesn’t have to be released on Xbox Game Pass following developer Undead Labs’ sale to its mystery new owner. Xbox boss Asha Sharma’s email to staff confirmed “Ninja Theory and Undead Labs have entered terms to join new ownership with funding to complete and grow Senua and State of Decay 3.” Assuming both games are released, could they now skip Game Pass entirely? More here.
The Elder Scrolls Online forced to change roadmap
The Xbox layoffs have hit the Elder Scrolls Online development team at ZeniMax Online Studios, causing a change in the long-running MMO’s roadmap of content. Associate Director of Community, Jessica Folsom, posted in the game’s forum to say Season One will launch as planned, but beyond that, things have changed.
“Looking beyond Season One, the roadmaps we previously shared will be shifting,” Folsom said, without going into detail. “We want to take the time to evaluate the work in front of us and then lock down an updated schedule. While we’d love to share a concrete details today, stepping back to get our plans straight will let us come back to you with a clear timeline.
“This game is nothing without you, our community. Thank you for sticking with us, and for everything you bring to Tamriel.”
The message here is clear: the layoffs have forced a content rethink. According to Kotaku, staff are now concerned about the future of The Elder Scrolls Online with so few developers left to work on it. More here.
Fans are worried about Starfield
According to a new report from Bloomberg, Microsoft’s restructuring of Xbox will see Bethesda focusing on a handful of franchises going forward: Fallout, The Elder Scrolls, Wolfenstein, Doom, and Quake. These five franchises are expected to be a priority, with at least three of them already having games in development. That doesn’t leave much room for more Starfield or Starfield 2, and fans of Bethesda’s sci-fi RPG are now worried it’s dead.
Xbox Is ‘Not Healthy,’ But Losing All of This Talent Isn’t the Cure
We also have an opinion piece from IGN Senior Editor Simon Cardy, who questions whether draining this much talent is really the way to cure Xbox. With multiple studios set to be jettisoned from its portfolio and left to fend for themselves, many avenues of creativity could soon be demolished, as Microsoft appears to be going all-in on a handful of decades-old “mega franchises” like Halo, The Elder Scrolls, and Call of Duty.
What’s happening with Marvel’s Blade?
As part of today’s announcement, Xbox boss Asha Sharma said Arkane’s management “is beginning required consultation with its Works Council to review potential strategic options.” As a French studio, Arkane must follow the country’s labor law around a potential sale or closure, and this process may take some time. Meanwhile, the future of Marvel’s Blade, which was in development at Arkane Lyon, remains unclear. Will it be released? Is it canceled? Could another company pick it up, with Arkane Lyon potentially continuing development? IGN has asked Marvel Games for comment. More on the situation with Blade here.
ZeniMax (Bethesda, id Software, MachineGames)
Bloomberg reporter Jason Schreier has said that while Microsoft-owned ZeniMax will suffer from today’s cuts, it won’t be left to work on Fallout and The Elder Scrolls only. Yes, Bethesda has The Elder Scrolls 6 in the works, and the expectation is that there will be a focus on getting new Fallout games out the door. But ZeniMax studios will also work on Doom and Quake (id Software) and Wolfenstein (MachineGames). There’s no mention of Indiana Jones, however, which suggests MachineGames will not get the chance to work on a sequel to the well-received Indiana Jones and the Great Circle.
Double Fine and Compulsion Games
Double Fine and Compulsion Games have now issued public statements to confirm their status following word of today’s enormous cuts by Xbox, discussing their respective futures as independent studios. More here on the fate of the likes of Psychonauts and South of Midnight.
State of Decay 3
Asha Sharma has said Undead Labs will be sold “with funding to complete and grow” State of Decay 3, which suggests the game will be released eventually. But we don’t know who has bought the studio, and we don’t know if it will suffer any layoffs as a result. State of Decay 3 only appeared at the Xbox Games Showcase last month, where it had a new trailer with a 2027 release window.
Wesley is Director, News at IGN. Find him on Twitter at @wyp100. You can reach Wesley at [email protected] or confidentially at [email protected].
