Xbox cutting 5 studios, thousands of jobs in major restructure

Microsoft confirmed plans to cut five studios from Xbox Game Studios and lay off thousands of employees, according to VGC. Double Fine, Ninja Theory, and Compulsion are among the teams that will either leave the Xbox umbrella or be sold to outside buyers. No full studio closures have been announced.

The restructure hits teams responsible for Psychonauts, Hellblade, and We Happy Few. Microsoft hasn't clarified which studios are being sold versus spun out. The layoffs follow similar cuts in 2024 and reflect ongoing pressure to streamline Xbox's portfolio after the Activision-Blizzard acquisition ballooned headcount.

For PC gamers, this matters mostly if you were counting on Game Pass day-one releases from these studios. Double Fine's next project and Ninja Theory's Hellblade 3 (unannounced) now face uncertain timelines. If those teams land at smaller publishers, expect longer dev cycles and less guaranteed PC optimization on launch.

Check which Xbox Game Studios titles are still in your BetterFPS library — if you've been tuning settings for Psychonauts 2 or Hellblade 2, those playbooks stay valid, but future updates from these teams are now a question mark.