Xbox is undergoing one of the most chaotic weeks in its history. Numerous layoffs, the shutdown of prominent studios, and the cancellation of much-anticipated games are shaking up Microsoft’s gaming division. But which initiatives are being abandoned, who remains – and what does this entail for gamers?
In pursuit of lost fame
Not long ago, Xbox was still associated with innovative game studios bearing significant names. Rare, Turn 10, The Initiative – just the logos could excite many fans. However, behind the curtain, the facade was beginning to unravel. Anxiety was already spreading in 2023: despite Game Pass’s success, some first-party titles did not meet expectations.
The situation deteriorated when several prominent studios were compelled to shut down in 2024 – a precursor to what was about to unfold. In June 2025, the next escalation occurred: a new wave of layoffs that astonished even those in the know. What was quietly surfacing constituted more than just a course correction. It is a complete transformation of the Xbox identity.
Xbox layoffs Microsoft restructuring: The major reduction has commenced
With over 1,900 positions eliminated and multiple AAA projects canceled, Microsoft is openly indicating that its Xbox division is undergoing restructuring. Among those impacted is The Initiative, the studio aiming to revive a beloved classic with the Perfect Dark reboot. Now, not only is the game history, but so too is the entire development team.
The outlook for Rare appears similarly grim. Everwild, a project that generated buzz with its enchanting fantasy realm and enigmatic trailers, has seemingly been permanently shelved. The team had already shifted its creative direction multiple times, most recently even under former Banjo-Kazooie veterans. However, the indicators were never truly favorable.
This is intensified by additional layoffs at Zenimax Online and Turn 10, where not only staff but also entire conceptual stages for mobile spin-offs are reported to have been eliminated. Microsoft itself refers to a focus on “sustainable projects with high potential” – indicating primarily Game Pass-optimized content.
For gamers, this implies fewer adventurous experiments and more brand stewardship. At least Xbox has announced that over 40 titles are in active development, including State of Decay 3 and a new installment in the Gears series. It remains uncertain whether these plans will suffice to regain fan loyalty.
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