Microsoft is planning sweeping Xbox layoffs starting July 6, with plans reportedly including shutting down Arkane Studios and canceling its Blade game. The move would follow earlier studio closures, job cuts across Xbox and Activision Blizzard, and rising pres
By July 6, the Xbox studios Microsoft has built over years could look very different. Planning for a sweeping round of layoffs reportedly includes shutting down Arkane Studios and canceling the Blade game the company has been working on since the end of 2023. with the game reportedly over budget and facing delays.
The Blade situation has been simmering for a long time. There hasn’t been an update on Marvel’s Blade in more than two years. and the latest reporting says it’s now “over budget” and stalled. For the people tied to that project—and for the studios that may be folded into the same timeline—this isn’t a distant corporate restructuring. It’s the kind of decision that turns months of work into a sudden stop.
Alongside Arkane. Microsoft is reportedly preparing to close or sell off five studios next week: Compulsion Games. Double Fine. Ninja Theory. Undead Labs and Arkane. Microsoft is said to be exploring options to sell Arkane. similar to its reported approach with Compulsion. Double Fine. Ninja Theory and Undead Labs.
The pressure inside Xbox appears to have been building. The entire Xbox division is bracing for layoffs after a memo from new CEO Asha Sharma and Chief Content Officer Matt Booty warned, “We have found ourselves over-extended…. Going forward, this cannot continue.”
Union members represented by CWA have publicly expressed disappointment and frustration with Microsoft leadership ahead of the firings. They have called for good-faith negotiations and transparency.
Arkane Studios is best known as Arkane Lyon. the maker of the Dishonored series and Deathloop. a team recognized for polished first-person stealth experiences in stylish environments. Microsoft previously shut down Arkane Austin. which was responsible for Prey and Redfall. as part of a wave of Xbox layoffs and studio closures in 2024.
At the time, Arkane Lyon co-creative director Dinga Bakaba shared a blunt message: “This is absolutely terrible. Permission to be human: To any executive reading this. friendly reminder that video games are an entertainment/cultural industry. and your business as a corporation is to take care of your artists/entertainers and help them create value for you. Don’t throw us into gold fever gambits. don’t use us as strawmen for miscalculations/blind spots. don’t make our work environments Darwinist jungles. You say we make you proud when we make a good game. Make us proud when times are tough. We know you can, we seen it before.”.
Those words—focused on creative people, not spreadsheets—now hover over another moment of uncertainty.
The broader gaming job market has already taken a hard hit. The video game market lost an estimated 14,600 employees to mass firings in 2024, following a loss of roughly 10,500 in 2023, according to the Game Industry Layoffs tracker.
Microsoft’s pattern of acquisition and restructuring also sits in the background. Its $69 billion purchase of Activision Blizzard King—the largest acquisition in the industry’s history—was finalized in 2023. That deal followed Microsoft’s $7.5 billion purchase of ZeniMax (including Arkane Studios) in 2021 and earlier studio-buying sprees.
In January 2024, Microsoft slashed 1,900 jobs across Xbox, Activision, Blizzard and ZeniMax. That year. Xbox shut down Arkane Austin and Alpha Dog Games. sold off Tango Gameworks. and fired an additional 650 employees in 2024. The Xbox division was rocked again by layoffs and studio shutdowns in the summer of 2025. when Microsoft laid off 9. 000 employees across the broader company.
The incoming 2026 Xbox layoffs may already be touching more studios than this headline suggests. It appears the layoffs have affected Hitman and 007 First Light developer IO Interactive. which was reportedly working on a fantasy game with Xbox as its publisher. IOI said its relationship with “an external partner” recently ended and it had to reduce staffing as a result.
Not every Xbox-linked project seems to be in the same position. Kojima Productions’ game OD, being published by Xbox, will not be affected by the layoffs, according to IGN.
Taken together. the facts point to a familiar sequence: ambitious commitments. high-profile game development delays and budget pressure. and then a corporate pivot that lands hardest on entire teams and studios. For workers waiting through the final week before July 6. it’s not just about which games survive—it’s about whether a studio itself will.
Xbox layoffs Arkane Studios Blade game Marvel's Blade Microsoft Asha Sharma Matt Booty CWA studio closures Game Industry Layoffs tracker IO Interactive OD
So they’re really gonna cancel Blade like it’s nothing? smh.
I swear every time Microsoft says “over-extended” it just means more exec bonuses and less people. Arkane closing feels random tho, because Deathloop was like the only reason I still cared about Xbox.
Wait, Dishonored and Deathloop are from Arkane Lyon right? If they shut Arkane does that also mean those games are getting removed from Game Pass or something? Like I don’t get how that works.
This is exactly why I don’t trust “new CEO” announcements. They say July 6 like anyone can plan for that. Also “over budget” and “stalled” makes it sound like the investors are mad, not the devs… but the devs always get hit first. Next thing you know they’ll blame the delay on “union stuff” even if the article didn’t say that.