Xbox cuts 3,200 jobs as hardware revenue falls 29% in one year

The biggest Xbox redundancy round in the platform's 25-year history

Microsoft confirmed on Monday 6 July 2026 that its Xbox gaming division would cut approximately 3,200 jobs — around 20% of its entire workforce — in what new Xbox CEO Asha Sharma described as "the most significant restructure in XBOX history." Half of those roles, 1,600 positions, were eliminated on the day of the announcement itself. The remaining cuts are expected to follow over the next 12 months.

The scale of the redundancies dwarfs anything previously seen in the gaming division and arrives at a moment of genuine crisis. Full-year Xbox revenue for fiscal 2026 came in at approximately $21.79 billion, down roughly $1.7 billion — or 7% — from around $23.46 billion in fiscal 2025. Hardware was the worst performer by far, with Microsoft's own 10-K filing stating that "Xbox hardware revenue decreased 29 percent driven by lower volume of consoles sold." Quarter by quarter, the picture was consistently grim: hardware fell 29% in Q1, 32% in Q2, 33% in Q3, and 13% in Q4.

The cuts affect almost every corner of the Xbox empire, including Activision, Bethesda and ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios. The announcement also landed alongside a broader Microsoft corporate reduction of around 4,800 jobs company-wide — but Xbox's 20% cut ran nearly ten times deeper than the 2.1% average across the wider company.

Sharma's diagnosis: "Our business today is not healthy"

Sharma, who officially became EVP and CEO of Xbox on 23 February 2026 — succeeding Phil Spencer after his retirement following nearly 40 years at Microsoft — posted her staff memo to X on the day of the announcement. She did not soften the message.

"Our business today is not healthy," Sharma wrote, adding that Xbox is operating at margins three to ten times lower than comparable businesses.

"It is neither possible nor desirable to own every great independent studio. We have also learned that we are not the best home for every type of studio; in a typical year, we lost 64 cents for every dollar we invested."

Despite the severity of the cuts, Microsoft confirmed that no publicly announced games have been cancelled and no studios are being outright closed. However, four studios are being restructured out of Microsoft's direct ownership.

Studios going independent or being sold

Compulsion Games and Double Fine Productions are being returned to their management teams and will operate as independent studios, retaining full rights to all of their intellectual property — including anything created during their time under Xbox ownership. Microsoft is providing runway funding to both studios to help them start new projects and secure future investment and publishing deals.

Ninja Theory and Undead Labs are being sold to new owners. Microsoft has confirmed contracts are pending but has not disclosed who the buyers are. Both studios will receive funding to complete their current in-development titles: Senua (Ninja Theory) and State of Decay 3 (Undead Labs). A fifth studio, France-based Arkane, is "beginning required consultation with its Works Council to review potential strategic options," according to Sharma.

Mojang — home of Minecraft — and King, maker of Candy Crush, were identified by Sharma as Xbox's "largest by monthly active players" and will now report directly to her.

UK prices jumped by up to £170 on 1 August

Compounding the redundancy news, Xbox console prices across the UK rose sharply on 1 August 2026, following a worldwide increase first announced on 25 June 2026. Microsoft cited a global memory and storage shortage as the reason. The new UK prices are as follows:

• Xbox Series S 512GB: £299.99 → £429.99 (up £130, or 43%)
• Xbox Series S 1TB: £349.99 → £519.99 (up £170, nearly 49%)
• Xbox Series X 1TB Digital Edition: £449.99 → £619.99 (up £170, roughly 38%)
• Xbox Series X 1TB Disc Model: £499.99 → £669.99 (up £170, roughly 34%)

Put into longer-term context, the Xbox Series S originally launched at £249.99 in November 2020. It now costs £429.99 — a £180 increase of around 72% over six years. The entry-level Series S now sits just £20 below the £449.99 launch price of the disc-equipped PlayStation 5.

Sony raised PlayStation 5 prices in April 2026, but the standard disc-based PS5 is still £100 cheaper than the 1TB Xbox Series X disc model. At the top end, the highest-spec Xbox Series X at £669.99 remains below Sony's PlayStation 5 Pro, which retails at £789.99. According to Pure Xbox, the price increase has pushed the 512GB Series S past the cost of competing PC handheld devices, with one ROG Xbox Ally found going for £379.99.

Industry context and what comes next

Before Microsoft's announcement, the games industry had already logged an estimated 4,600 layoffs across 22 shuttered studios in 2026. Xbox's single announcement added the equivalent of nearly 70% of that entire year's total in one day. The Communications Workers of America and ZeniMax Workers United held rallies protesting the layoffs in mid-July 2026, approximately a week after Sharma's memo was published.

By contrast, Nintendo sold 19.86 million Switch 2 units through March 2026 — beating its own 19 million forecast — during the same period in which Xbox hardware revenue fell 29%.

Microsoft is reportedly still losing approximately $150 on every console it sells in the US, where the 1TB Xbox Series X carries an $800 price tag. Nintendo is expected to implement its own price increases from 1 September 2026, meaning further pressure on UK families looking ahead to the Christmas shopping season.