Microsoft Xbox undergoes major restructure and layoffs under new CEO

Microsoft’s Xbox division is entering a sweeping reorganization dubbed the “Xbox Reset.” New CEO Asha Sharma took over from Phil Spencer in early 2024, inheriting four rounds of layoffs in two years, the shutdown of studios such as Arkane Austin and Tango Gameworks, and the cancellation of projects like ZeniMax Online’s Blackbird.

The changes follow Microsoft’s shift toward profitability after the $69 billion Activision Blizzard acquisition, slower Game Pass subscriber growth, and a new corporate emphasis on artificial‑intelligence initiatives. Executives are pressuring Xbox to deliver clearer financial returns, leading to uncertainty for internal studios about goals, green‑lighting, and long‑term planning. Despite the turmoil, some staff still express confidence in leadership, but the overall direction points toward tighter cost control and broader multi‑platform releases.

The restructuring reflects broader tensions within Microsoft’s many divisions, with divergent priorities between hardware, cloud, and subscription services shaping Xbox’s future strategy.