Xbox CEO Sharma reportedly plans three more layoff rounds

Xbox CEO Asha Sharma is reportedly preparing three additional layoff rounds scheduled for October, November, and January, according to Notebookcheck, and Microsoft has not publicly confirmed the details.

Microsoft laid off around 260 more employees in September as part of the ongoing Xbox restructuring. That September reduction followed the July 2026 announcement, which included 1,600 immediate job cuts and plans to cut 1,600 more by the end of fiscal 2027. The total reduction of about 3,200 jobs equaled roughly a fifth of Xbox’s workforce and was framed as part of a broader 2027 fiscal reset.

Asha Sharma took over as Xbox CEO in February 2026 and has been reshaping the business since then. In an earlier memo, Sharma described Xbox’s business as unhealthy and said previous investments and strategies had not delivered expected growth.

Sharma’s memo warned that hiding hard truths or repeating the same approach would not lead to success. The memo emphasized transparency about Xbox’s challenges as the company undertook a reset and reassessment of its portfolio and infrastructure. “We won’t succeed by hiding hard truths, nor will we succeed by doing the same thing and expecting different results,” Sharma wrote.

Xbox is prioritizing established franchises and projects with clearer commercial prospects as part of the restructuring. The company has committed to two major exclusives at present and will continue to evaluate exclusivity as the company becomes healthier.

Sharma’s internal memo identified five realities facing Xbox, such as a revenue decline described as unsustainable and a hardware component crisis. The memo stated Xbox became overextended expanding its studio system for subscription, streaming and devices and had not adequately funded its industry-defining franchises to compete and win as strategies changed in a content-rich landscape.

Xbox Chief Strategy Officer Matthew Ball, who joined less than a month before the June 2026 report, said the component crisis left Xbox unable to meet console demand and forced a rethink on Project Helix. Ball’s comments came days after Xbox’s showcase event and alongside reports of layoffs and budget cuts, highlighting pressure on the hardware business.

Microsoft’s spending on console storage components has doubled since last fall and is projected to reach five times that level for Project Helix. Sharma raised the storage cost issue in her internal memo.

Fortune cited a current projection for Project Helix, Xbox’s next-gen PC-compatible console, of between $1,200 and $1,800 if Microsoft does not subsidize the hardware. Xbox’s next hardware release is reportedly a handheld device set for the 2027 holiday season, with the full Project Helix console arriving during 2028. Sharma hinted in an August interview that Project Helix would be a family of gaming devices, which aligns with the reported separate handheld and console releases.

Bloomberg reported that Sharma pulled a trailer for Halo: Campaign Evolved from PlayStation’s latest State of Play, potentially damaging relations between Xbox and Sony. The trailer pull came after a recent trailer for the game carried a disclaimer noting footage was captured on PS5 Pro, and some had speculated this was the reason. Sharma reportedly decided to scrap the PlayStation 5 version of Gears of War: E-Day according to Bloomberg, and the game was originally in development for PS5.

Fortune cited unnamed insiders describing a possible Game Pass overhaul involving à la carte pricing with add-ons for console-only games, cloud gaming, and multiplayer. The Game Pass detail appeared alongside reporting that the next layoff rounds are expected in October, November, and January.

Sharma unveiled the July restructuring through a memo on X and Xbox’s official news site, describing it as the largest restructure in the division’s history and describing the business as unhealthy.

The July 2026 restructuring hit several studios. Id Software lost 136 of its roughly 185 employees at its Richardson, Texas office in the July cuts. ZeniMax Online Studios lost 213 positions at its Cockeysville, Maryland office in the July round, and four senior studio leaders departed. ZeniMax Online Studios develops The Elder Scrolls Online.

Ninja Theory and Undead Labs moved to new owners in the July restructuring who agreed to fund completion of Senua’s Saga and State of Decay 3. Double Fine Productions and Compulsion Games returned to independent ownership and kept the rights to their games. The July restructuring saw four studios leave Xbox’s portfolio.

Blizzard was largely untouched by the July 2026 restructuring that eliminated 1,600 positions immediately. The July round affected Id Software, ZeniMax Online Studios, and other studios, but Blizzard was not among those hit.

Notebookcheck lists Ninja Theory among studios affected by reshaping and says the studio may face closure, while GodisaGeek states the studio moved to new owners in July who agreed to fund completion of Senua’s Saga and State of Decay 3.

Xbox was preparing to cut hundreds more jobs and consolidate several game studios in the week of September 22, 2026, with formal changes expected on September 23, 2026. The September cuts would be the division’s second staff reduction of 2026, following the July eliminations, and Microsoft had not confirmed which studios were involved or how many roles would be affected.

The consolidation would combine overlapping teams within Xbox Game Studios, Bethesda, Activision and Blizzard’s publishing operations, and no reports describe outright studio closures under that plan. Separate reports since the weekend had named Blizzard and Halo Studios as likely candidates for the September round.

Microsoft accounts for the biggest portion of the more than 14,000 layoffs reported across the games industry in 2026. The industry-wide figure for 2026 places Microsoft’s cuts within a broader trend of workforce reductions across the games sector.

In January 2024, Microsoft eliminated 1,900 positions across Activision Blizzard, Xbox and Bethesda after completing its acquisition of Activision Blizzard. Those reductions preceded the 2026 restructuring under Sharma. In July 2025, Microsoft eliminated more than 9,000 positions company-wide, about 4% of its global workforce, canceling the Perfect Dark reboot and Rare’s Everwild and closing The Initiative. The July 2025 company-wide cuts were part of earlier reductions before the Xbox reset.