Microsoft is laying off 268 Xbox employees in Washington state. It’s part of a broader reduction in force affecting 500 to 600 workers, according to a company spokesperson.

Microsoft will also reorganize several gaming studios within the Xbox business. The changes include bringing World’s Edge, Rare, as well as the next Halo title under Activision’s banner.

The layoff is part of a previously announced 3,200-person downsizing in July. At the time, Xbox’s new CEO Asha Sharma said the business had become unsustainably bloated.

“Our business today is not healthy,” Sharma said in the July announcement. “We are operating at margins that are 3-10x lower than comparable platform and publishing businesses.”

The latest layoffs are part of an ongoing course correction, according to Microsoft’s Chief Communications Officer Frank Shaw. He said no particular role was targeted, but that the layoffs affected a broad swath of Xbox employees.

Gaming is wildly popular, but the industry has also become highly saturated. Microsoft has struggled to compete for gamers’ attention and keep up with rising hardware costs.

Still, Microsoft says it continues to hire across the company.

Monica Nickelsburg is a reporter with KUOW. This story comes to you from the Northwest News Network, a collaboration between public media organizations in Oregon and Washington.

It is part of OPB’s broader effort to ensure that everyone in our region has access to quality journalism that informs, entertains and enriches their lives. To learn more, visit our journalism partnerships page.

News Source : https://www.opb.org/article/2026/09/22/microsoft-lays-off-xbox-employees-washington/