The Five Studios Xbox Bragged About in 2018 Are Now Being Sold

In 2018, Microsoft bragged about the five studios it had just added to Xbox. Seven years later, it's selling almost all of them.

Xbox CEO Asha Sharma announced Monday that the division will cut 3,200 jobs, roughly 20% of its workforce, over the next year, while divesting four studios entirely and beginning the process of parting ways with a fifth.

Why Sharma Says This Had to Happen

"Our business today is not healthy," Sharma wrote in a memo to staff, saying Xbox operates at margins three to ten times lower than comparable platform and publishing businesses.

She said the affected studios have been losing 64 cents for every dollar invested, calling the changes necessary to "reset Xbox."

Sharma confirmed no previously announced first-party games are being canceled as a result of the cuts, and said overall content spending next fiscal year will roughly match this year's record level, just redistributed toward different priorities.

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The Studios Being Sold Off

Compulsion Games and Double Fine will become independent studios, while Undead Labs and Ninja Theory are being sold outright.

Xbox is also looking to sell or spin out Arkane Studios, with the France-based developer beginning required consultation with its Works Council over its future.

That leaves Playground Games as the only studio remaining from Xbox's original 2018 acquisition wave, joined in the current Xbox portfolio by InXile and Obsidian.

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The Irony of the 2018 Reversal

Then-Xbox chief Phil Spencer announced these same studios at E3 2018 alongside the newly formed studio The Initiative, telling the audience: "These five new teams will have the resources to take bigger risks for you."

The Initiative was already closed in 2025, meaning virtually the entire 2018-2019 Xbox studio acquisition spree will be undone once this latest round of divestments completes.

The studio spin-offs effectively acknowledge that Microsoft, in Sharma's own past words, had "over-extended" its gaming teams beyond what it could manage or fund effectively.

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Part of a Bigger Corporate Pattern

Microsoft cut roughly 1,900 gaming jobs in early 2024 after closing its Activision Blizzard acquisition, then another 650 in September 2024, making this the third major round of gaming cuts in under three years.

The reductions are being softened somewhat by the redeployment of more than 4,000 employees into new roles over the past year, alongside a voluntary retirement program that let others exit on their own terms.

The cuts arrive amid record capital spending on Microsoft's AI infrastructure, sustained pressure from Wall Street to control operating expenses, and a roughly 30% stock slide that has weighed on the company's broader valuation.

What Survives the Cuts

Titles including "Minecraft" and the "Elder Scrolls" franchise have been named as priority growth areas going forward, alongside continued investment in Playground, InXile and Obsidian's ongoing projects.

The layoffs will touch nearly every division at Xbox, spanning developers including Activision, Bethesda/ZeniMax, Blizzard, King and Mojang, though the size of cuts will vary significantly by team.

TL;DR

• Xbox is cutting 3,200 jobs, about 20% of its workforce, over the next year.

• Four studios — Compulsion, Double Fine, Undead Labs and Ninja Theory — are being spun off or sold; Arkane is under review.

• CEO Asha Sharma said the affected studios were losing 64 cents for every dollar invested.

• This undoes nearly all of Xbox's high-profile 2018 studio acquisition spree.

• The cuts come amid record Microsoft AI capital spending and a roughly 30% stock slide.

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