Xbox's Official Shakeup Continues Through 2027 with New Rounds of Layoffs

Published Oct 21, 2026, 10:30 AM EDT

Elijah is a freelance news writer at Polygon. He was an associate editor at The A.V. Club and Paste, and has been featured in outlets like Game Informer, Fanbyte, Unwinnable, and more. He loves media in all forms, from fighting games and horror flicks to slow cinema and visual novels. He's from the Greater Boston area.

In the report, Jason Althoff, CEO of Microsoft’s commercial business, downplayed the lingering rumor that Xbox may be spun off and sold.

“Asha is one of the best leaders we have at the whole company,” Althoff said. “We would not have put her on a business we intend to sell. There’s going to be a ton of speculation about all this. Time will tell.” Sharma previously said that the Xbox division is not for sale in a statement to The New York Times.

Beyond the layoff news, Fortune's article also indicated that Microsoft plans to launch a next-generation handheld device in 2027, followed by its next major console, Project Helix, in 2028. Yesterday, a credible leaker on NeoGAF indicated that the upcoming PlayStation 6’s “RAM + NAND alone” cost over $680, meaning the console will likely go for over $1,000. Project Helix is expected to be similarly, if not more, expensive, with a recent report estimating it could cost as much as $1,800.

What other big changes has Xbox made recently?

Image: Xbox/Microsoft

As part of Xbox’s wave of layoffs, the company has divested from several of its acclaimed studios, including Double Fine, Ninja Theory, Arkane Studios, Compulsion Games, and Undead Labs. Of these, Ninja Theory and Arkane are currently at risk of shutting down, while the other three bought back their independence from Microsoft after internal layoffs.

The studios that Microsoft hasn't cut ties with also underwent major changes. Development of the Halo series is being moved under Call of Duty publisher Activision, with Halo Studios seemingly being relegated to a support role. Obsidian Entertainment has been shuffled under Bethesda leadership, where the team is working on a new Fallout game. Microsoft cut the headcount of legendary Doom developer id Software to such an extent that the studio likely won’t be able to make a game of similar scope to Doom: The Dark Ages.

As for why Xbox has had such sweeping changes, Sharma previously said in a memo to employees that “our business today is not healthy.” She added, “We are operating at margins that are 3-10x lower than comparable platform and publishing businesses. We entered Gen 9 with a smaller install base and a higher cost structure. To grow, we bet on Game Pass, multi-platform, and a broader portfolio of content. While those businesses have created meaningful value, they did not grow at the pace we expected.”

“We must reset Xbox,” Sharma concluded. More than four months after that statement, it’s clear we’ll be seeing the effects of this ongoing Xbox “reset” for some time to come.