Asha Sharma confirmed this week what many had already suspected: the situation at XBOX is more dire than it appears. Despite a series of recent adjustments, the company remains on shaky ground. Forecasts are grim, and leadership acknowledges that radical changes are necessary to keep the business afloat before any true new era for XBOX can begin.

Achieving that goal, however, will come at a significant cost. A recent report indicates that Microsoft is preparing another wave of job cuts within its gaming division. According to a trusted source, this decision will directly affect XBOX Game Studios, potentially leading to the shutdown of one of its internal teams.

July Layoffs Could Claim an XBOX Studio

Asha Sharma recently admitted that XBOX is struggling on multiple fronts. The company has failed to meet its financial targets, memory-related hardware issues are threatening next-generation plans, XBOX Game Pass is recovering only slowly, and XBOX Game Studios has underperformed due to poor organization.

Bloomberg journalist Jason Schreier reports that these and other factors will push Microsoft into conducting another round of layoffs at XBOX. An official announcement is expected sometime in July. If confirmed, it would deliver yet another heavy blow to both the company and its fans.

Adding to the concern, Tom Warren of The Verge has revealed that the cuts would likely target XBOX Game Studios. Under Phil Spencer’s leadership, the company pursued aggressive expansion through studio acquisitions and attempts to form new teams with veteran developers, many of which failed.

Nevertheless, XBOX Game Studios grew substantially, particularly following the acquisitions of Bethesda and Activision Blizzard. Today, it stands as one of the largest and most influential video game publishers in the industry, offering a broad catalog of titles across all platforms.

However, repeated crises have already forced the closure of multiple studios, disrupting the organization and reach of XBOX Game Studios. Warren stated that another team could shut its doors as a result of the impending layoffs, though it remains unclear which studio might be affected.

“Some sources suggest that the cuts could even involve the closure of a studio or changes to the XBOX studio roster,” Warren shared.

Xbox Game Studios crisis

Which XBOX Game Studio Might Be at Risk?

XBOX Game Studios currently oversees a prestigious roster including The Coalition, Mojang Studios, Playground Games, Ninja Theory, Halo Studios, Rare, and Obsidian Entertainment. Other teams such as Compulsion Games, Double Fine, World’s Edge, Undead Labs, InXile Entertainment, and Turn 10 have also impressed players with their work.

In addition, the company now manages the extensive development resources of Bethesda and Activision Blizzard King, which are responsible for some of XBOX’s most important franchises. Yet the picture is far from perfect. The company was forced to close The Initiative in 2025, following earlier shutdowns of Arkane Austin, Alpha Dog Games, and Tango Gameworks, decisions that drew sharp criticism from players.

With more layoffs reportedly on the horizon, speculation is growing that another studio may close this year, though for now this remains a rumor rather than a confirmed fact. Some speculate that XBOX might sacrifice a studio that has remained in the background in recent years, such as Compulsion Games, Double Fine, or Turn 10.

For now, industry watchers and fans alike will have to wait to see whether the reports of layoffs and a studio closure prove accurate.

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