Xbox's Restructuring Isn't Over: Reportedly Three More Layoff Waves Planned Through January

When Matt Booty addressed Xbox staff on September 22, the message in his "Continuing Our Reset" memo was one of nearing the finish line. The actions taken since July, he wrote, had brought the division "roughly three-quarters of the way through" its restructuring.

Less than a month later, that finish line appears to have moved. According to a Fortune report published October 20, Xbox CEO Asha Sharma is preparing three additional rounds of layoffs, with waves expected as early as this month, then again in November, and once more in January. The reporting cites "people familiar with the plans," who cautioned that the schedule could still change.

If the report holds, it raises an uncomfortable question for a division that has spent 2026 telling staff and investors it was close to done: why does the cutting keep coming? Microsoft has not confirmed the timeline, and no headcount figures for the upcoming rounds have been reported. Every detail about the schedule traces back to anonymous insiders.

What's Actually Being Reported, and What's Confirmed

It is worth separating the confirmed record from the reported one.

What Microsoft has acknowledged is substantial. In July 2026, Sharma announced that Xbox would eliminate 3,200 roles across Microsoft's fiscal year 2027, with roughly 1,600 cut at the time as part of a 4,800-person reduction across Microsoft that day. The September memo then confirmed 268 additional role eliminations spanning Halo Studios, other first-party teams, and Xbox Game Studios management and central functions.

What remains unconfirmed is everything about what comes next. The Fortune report does not specify which teams the upcoming rounds would target, and Microsoft has not issued any statement on the schedule.

The math around "three-quarters through" also deserves scrutiny. Third-party tallies of Xbox layoffs to date have landed lower than what that framing implies, largely because the official figure appears to count studio divestitures alongside role eliminations. Compulsion, Double Fine, and Undead Labs leaving the first-party umbrella reduces headcount just as surely as a layoff does, even if it does not appear in layoff trackers. Readers should treat the "three-quarters" language as an official characterization rather than a precise accounting.

The September Reorg That Set the Stage

The layoffs did not arrive in a vacuum. September's restructuring was one of the most sweeping reorganizations in Xbox's history, and it was as much about subtraction as reduction.

Activision absorbed World's Edge and Rare, and will develop the next Halo. Bethesda took on Obsidian. King absorbed Microsoft Casual Games. Playground and Turn 10, two studios long associated with the Forza franchise, were merged. On the divestiture side, Compulsion and Double Fine returned to management with their IP, back catalogs, and runway funding, with Undead Labs transitioning on similar terms. Ninja Theory faces a proposed closure after two agreements fell through.

The throughline is consolidation under the biggest brands: fewer studios, fewer labels, and a narrower portfolio concentrated under Activision, Bethesda, and King. Headcount reduction is one lever; consolidation and divestiture are others.

Xbox is also not cutting in isolation. The industry's 2022 to 2026 contraction has seen an estimated 45,000 jobs lost through mid-2025, with January 2024's Microsoft cuts marking a peak. What distinguishes Xbox's current situation is not the existence of layoffs but their pacing.

Why the Cuts Keep Coming

The business pressures behind the reset are not mysterious.

Fortune cites third-party estimates that Xbox consoles have sold just over a third of the PlayStation 5's install base, and pegs a Microsoft profit-margin measure for the Xbox unit at around 3%, a third to a tenth of what competitors achieve. Those are the kinds of numbers that force structural change regardless of leadership.

The strategic response reportedly includes a significant Game Pass overhaul, moving toward à la carte and tiered add-ons covering console-only games, cloud gaming, and multiplayer. On hardware, the plan reportedly targets a next-gen handheld for holiday 2027 and a next console for holiday 2028. Internal estimates under the "Helix" codename reportedly place the next-gen consoles at $1,200 to $1,800, figures that reflect internal projections, not announced pricing.

Leadership has also sought to quiet persistent speculation. Sharma, who took over Microsoft Gaming from Phil Spencer in February 2026, told The New York Times that "Xbox is not for sale," and Microsoft commercial CEO Judson Althoff echoed the sentiment, saying the company "would not have put her on a business we intend to sell."

The Human Cost of Drip-Fed Layoffs

For the people inside these studios, the reported schedule matters as much as the numbers.

Fortune's reporting indicates that the multi-wave approach has left some staff demoralized, with the limbo of staggered announcements proving corrosive in its own right. Eurogamer has separately reported widespread worry at The Coalition, the studio behind the upcoming Gears of War: E-Day, that cuts could be timed to avoid paying promised bonuses.

Those fears are reported, not confirmed, and Microsoft has not addressed them publicly. But the concern itself is instructive. A single cut, however painful, at least resolves uncertainty. Rolling waves extend it, and prolonged uncertainty carries real costs: retention risk among senior staff, difficulty recruiting, and a morale drain that outlasts any individual announcement.

Three-Quarters Done, With the Hardest Part Ahead

The immediate test is the October window. If cuts land this month, the report gains credibility and Microsoft will face pressure to comment. If the month passes quietly, the schedule may already have shifted. Beyond that, watch for signals in November and January: which teams are affected, whether the 3,200-role target holds, and how the Game Pass overhaul and hardware roadmap are announced, both will land against a backdrop of continued cuts and will inevitably be read through that lens.

The central tension in Xbox's reset is now impossible to ignore. Officially, the division is most of the way through its restructuring. Reportedly, the next three months will bring three more rounds of cuts.

Both things can be true, particularly if "three-quarters" counts divestitures and the remaining work is concentrated in areas Microsoft has not yet touched. But the gap between the reassuring internal framing and the reported reality is precisely what has staff on edge.

Microsoft's silence on the schedule is itself telling. A company confident that the worst was behind it would have reason to say so plainly. Instead, the next three months will reveal whether the reset is truly nearing its end, or whether the hardest quarters are still to come. This is a fast-moving story built on anonymous sourcing; readers should weigh it accordingly, and expect the picture to change.