Xbox Signals ‘Reset’ and Layoffs, Closes ‘Hellblade’ Studio Ninja Theory Microsoft’s Xbox division is entering a turbulent restructuring, moving from warnings of a strategic “reset” to concrete layoffs and the closure of one of its most acclaimed studios.

Early Warnings of a Reset

On June 10, reporting revealed that Microsoft was preparing “significant layoffs” at Xbox, with internal discussions about possible studio closures and major budget reductions across marketing and other areas. In a memo sent just before those reports surfaced, Xbox CEO Asha Sharma and chief content officer Matt Booty warned staff of an “Xbox reset” over the next 100 days, citing severe business headwinds.

They noted that, excluding Activision Blizzard King, Xbox had spent more than $20 billion on content, platform, and hardware subsidies over five years, even as annual revenue declined by nearly $500 million — a trend they said “cannot continue.” The executives also flagged a “hardware component crisis,” with costs for 2027 holiday components expected to be more than five times what Xbox paid just two years earlier, pushing the company to explore “a new business model and partnerships for hardware.”

From Strategy to Studio Closures

By June 15, the reset had tangible consequences. Xbox is closing down Ninja Theory, the UK studio behind the Hellblade series, according to reporting that staff were informed of the shutdown in a call and are now hoping the studio can find a buyer. The decision comes just over a week after Microsoft used its Xbox Games Showcase to reveal a new Hellblade game, Senua, leaving the future of that title unclear.

Ninja Theory’s closure is part of a broader restructuring in which “several” Xbox studios, including Compulsion Games and Double Fine, are in “active negotiations” about spinning off from Microsoft. Earlier reporting also indicated Compulsion was being considered for shutdown before talks shifted toward an independent future.

Competing Visions for Xbox’s Future

Internally, leadership frames the reset as necessary to rebuild Xbox’s platform stack and pursue new hardware, PC, mobile, and streaming strategies, potentially involving third-party OEMs building Xbox-branded devices. Sharma has already acted aggressively, recently locking key titles like Gears of War: E-Day and Clockwork Revolution as Xbox console exclusives.

For developers and players, however, the closures highlight the human and creative cost of that pivot. While Microsoft seeks a more sustainable business model, the loss of Ninja Theory underscores the risk that beloved studios and franchises become collateral damage in Xbox’s reset.

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