Satya Nadella Backs Xbox Streamlining After 268 More Roles Are Cut

Microsoft CEO Satya Nadella says he feels "fantastic" about Xbox’s studios and intellectual property portfolio while backing the broader restructuring now reshaping the gaming division. Speaking on the Sources podcast with Alex Heath, Nadella described the streamlining led by Xbox CEO Asha Sharma as "great to see" and said Microsoft now needs to build a sustainable gaming business capable of reaching more players. His comments arrived only days after Xbox confirmed another 268 role eliminations across Halo Studios, other first party development teams, and Xbox Game Studios management and central functions. Nadella did not specifically say the layoffs themselves were "great to see."

"There’s some amount of streamlining the team is doing, and Asha is doing, which is great to see."
— Quote by: Satya Nadella.

Nadella said Microsoft still views gaming as part of the company’s core identity and pointed to its collection of studios and franchises as the foundation for future growth. His longer term goal remains broader than the Xbox console itself, describing Microsoft as wanting to become both a strong game publisher and platform provider across PC and Xbox. He also said Sharma’s team expects Xbox to return to growth during the next fiscal year, while acknowledging that Microsoft still needs to determine the right sustainable business model for reaching more players.

The comments come during the largest restructuring in Xbox history. In July, Sharma announced plans to reduce the Xbox organization by approximately 3,200 people throughout FY27, beginning with around 1,600 role eliminations and the transfer of 4 studios to new management. Microsoft said the reset would also reduce management layers, consolidate services, cut vendor spending, and simplify an organization where some work reportedly passed through as many as 14 levels of management. The company argued that its platform teams had grown 40% since the beginning of the current console generation even as player numbers and playtime declined.

The latest September phase eliminated another 268 roles and reorganized several major studios. Activision is taking responsibility for the next Halo game through a dedicated team and expanding its oversight to Rare and World’s Edge, Bethesda is taking responsibility for Obsidian, and Playground Games and Turn 10 are being combined. Microsoft says the actions completed since July, including studio divestitures, bring Xbox roughly 75% of the way through the restructuring announced earlier in the year. That means the 3,200 figure should not be read simply as 3,200 layoffs still waiting to happen, since Microsoft is counting multiple forms of organizational reduction toward the overall reset.

The 268 latest Xbox role cuts and major studio reorganization, including the decision to move future Halo development to Activision. The changes have also had substantial consequences at individual teams, with World’s Edge losing just under half of its staff according to former Creative Director Adam Isgreen. Nadella’s comments therefore reflect Microsoft’s confidence in the restructuring strategy, while the workforce impact remains a separate and significant part of the same process.

Nadella’s wording is important. He praised the streamlining strategy and expressed confidence in Xbox’s remaining studios and franchises, but he did not directly celebrate employees losing their jobs. Still, describing the process as "great to see" immediately after another 268 roles were eliminated will understandably attract scrutiny because workforce reductions are one of the most visible consequences of that strategy.

Microsoft’s objective is becoming increasingly clear. Xbox is being rebuilt around fewer management layers, fewer independent business units, stronger publishing groups, and a requirement to return to sustainable growth. The unanswered question is whether that structure produces better games and a healthier long term business without losing too much of the talent and institutional knowledge Microsoft spent years acquiring.

Do you think Microsoft’s Xbox restructuring can create a healthier gaming business, or are the scale of the cuts and studio consolidation putting too much creative experience at risk?