The Xbox division may undergo a new and significant restructuring in the coming days. According to information released by journalist Tom Warren of The Verge, Microsoft is reportedly evaluating the closure of Arkane Lyon, a studio known for developing titles such as Dishonored and Deathloop, and is also considering the cancellation of the highly anticipated game Marvel’s Blade.
New layoffs and project risks
Such measures would be part of a new wave of layoffs scheduled to begin on July 6th. It is important to note that Microsoft has not yet issued any official confirmation regarding these rumors.
The title Marvel’s Blade, which was presented during The Game Awards in 2023, is developed by Arkane Lyon and would be the first game from the studio to feature the Marvel vampire hunter. According to rumors, the project is facing scheduling issues and exceeding the established budget, which has prompted Microsoft to consider its discontinuation. Since its announcement, Arkane has not provided new updates, images, or gameplay details about the game's development.
Studios under Microsoft's review
The restructuring evaluation is not limited to Arkane Lyon; other Xbox-owned studios are also being reviewed. Cited sources, including The Verge, Bloomberg, and GamesBeat, indicate that Microsoft is studying options such as sale, team reorganization, or closure for studios like Compulsion Games, Double Fine, Ninja Theory, Undead Labs, and Arkane Lyon. There is no definition yet on what actions will be taken regarding each of these groups.
Changes led by new management
Expectations for further cuts intensified after an internal communication issued by the new CEO of the Xbox division, Asha Sharma, along with content director Matt Booty. In this memo, the company admitted that it had expanded its operations beyond what was considered sustainable. The statement, as reported by international outlets, says: 'We are over-sized. From now on, this cannot continue.'
Unions representing Xbox employees have also criticized the company's lack of transparency, requesting negotiations before the implementation of cuts.
History of cuts at Arkane and Xbox
If the closure of Arkane Lyon is confirmed, it would represent another setback for one of the industry's most acclaimed studios. In 2024, Microsoft had already shut down Arkane Austin, responsible for the games Prey and Redfall, during another round of cuts that also affected Tango Gameworks, Alpha Dog Games, and several Bethesda studios. At that time, Dinga Bakaba, creative director of Arkane Lyon, publicly protested the decision, asking executives to treat developers as artists, and not merely as financial assets.
Xbox has been undergoing a long period of restructuring since the acquisition of Activision Blizzard, finalized in 2023 for approximately US$69 billion. During this period, Microsoft has promoted various reorganizations in its gaming division. In 2024 alone, about 1,900 employees were laid off across the Xbox, Activision, Blizzard, and ZeniMax teams. Additionally, another 650 professionals lost their jobs that year, while several studios were sold or closed. In 2025, a new wave of layoffs affected approximately 9,000 employees in different sectors of the company. Rumors suggest that the cuts planned for July 2026 could impact Microsoft partners, such as IO Interactive, which recently confirmed the end of an external partnership and reduced its staff. However, Hideo Kojima's project OD should not be affected.
