Microsoft is preparing another wave of mass layoffs in its gaming division—several studios are under attack, with Arkane’s Marvel’s Blade among the most high-profile projects at risk of cancellation. According to The Verge, the layoffs will begin on July 6 and affect at least a thousand employees. New Xbox head Ashley Sharma appears to be in a decisive mood: she previously warned of harsh measures, and now they are materializing.
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Microsoft’s plans to cut Xbox studios
The restructuring will affect not only rank-and-file developers but entire teams. Possible solutions include studio closures, spinoffs, mergers, and even complete project cancellations. One of the leading candidates for cancellation is Marvel’s Blade, which France’s Arkane Studios had been developing with ambitions of a major action blockbuster. The game was initially planned for release this year, but was later pushed back to late 2027—and, according to rumors, not only for creative reasons. The project’s budget has reportedly ballooned significantly, and under Xbox’s current economic policy, this overspending has become a fatal flaw.
Which Xbox studios are affected by the layoffs?
Arkane, known for Dishonored and Prey, is currently at risk—Microsoft is considering selling it or spinning it off. But that’s just the tip of the iceberg. In recent weeks, reports have surfaced that a similar fate could befall Compulsion Games, Double Fine, Ninja Theory, and Undead Labs. If buyers are found for these studios, they may yet be saved, but such negotiations typically take months, and time is running out—layoffs are set to begin in just a week.
Consequences of Microsoft’s Game Studio Closures
According to sources, the layoffs will be colossal. Behind the scenes, there’s talk of at least a thousand job losses, and if Microsoft does indeed close five studios, several hundred developers in those teams alone will be cut. This is part of a larger “reset” led by Ashley Sharma, who has already established herself as a proponent of tough decisions. If Blade is indeed canceled, it would be a painful blow not only to Arkane fans but also to Xbox’s image as a platform capable of supporting ambitious exclusives.
Right now, it looks like Microsoft is preferring to reduce risks rather than invest in potential hits with uncertain futures. For many developers, this means an anxious weekend, and for players, it’s yet another reason to reflect on how quickly even the most exciting announcements can be buried. There’s no official confirmation from Microsoft yet, but The Verge cites reliable sources, and given past layoffs in the industry, this scenario seems more than realistic.
Xbox Games Cancelled by Microsoft
While gamers are panicking over rumors surrounding Marvel’s Blade, the real disaster is unfolding elsewhere. In early July 2025, Microsoft launched its fourth round of layoffs in the past 18 months. Around 9,000 people across the corporation lost their jobs, but the Xbox gaming division was hit the hardest. There’s no insider speculation—head of Xbox Game Studios Matt Booty personally sent employees an internal email listing the canceled projects.
Closed Exclusives and Secret Xbox Projects
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The reboot of Perfect Dark (The Initiative). The gaming division’s biggest and most high-profile loss. The ambitious spy action game about Joanna Dark was in development in Santa Monica since 2018. In its seven years of existence, The Initiative hasn’t produced a single release. Ultimately, Microsoft closed the studio entirely, simultaneously terminating its contract with Crystal Dynamics.
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Everwild (Rare). A meditative adventure about magical nature was announced at X019 in 2019. The game was stuck in development hell for nearly ten years, with the concept constantly being reworked from scratch, but the bosses never saw any coherent gameplay. The project is officially dead.
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Project Blackbird (ZeniMax Online Studios). An unannounced MMORPG that was positioned as a direct successor to The Elder Scrolls Online. Development had been ongoing since 2018. Along with the project’s closure, the company’s longtime president, Matt Firer, left.
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Secret developments. In addition to major titles, Matt Booty mentioned “several unannounced projects” without providing details. They were erased from the plans.
Xbox / Microsoft Gaming Project Status
The scale of the slaughter is impressive: according to Bloomberg, the creators of Forza Motorsport at Turn 10 have lost half their team—the commercial failure of the 2023 release forced management to implement austerity measures. King (Candy Crush) has cut its staff by 10%, and Activision, Blizzard, Bethesda, and key Call of Duty and Halo studios, including Sledgehammer, High Moon, and Raven, have also been hit. This is a logical continuation of the 2024 purge, when Microsoft simultaneously liquidated Arkane Austin, Tango Gameworks, Alpha Dog, and Roundhouse.
Why Arkane Lyon continues to develop Blade
The only survivor of this massacre was the action game about the iconic vampire hunter. Arkane Lyon’s financial documents for 2024 confirm that the project successfully completed the prototyping stage and entered full production at the end of 2024. The team of 190 specialists is working without panic. Moreover, in May 2026, Todd Howard publicly praised the developers, and the studio’s art director succinctly reassured fans with the famous “Let us cook” gif. Against the backdrop of the general industry crisis, Marvel’s Blade’s position appears remarkably stable, so it’s definitely not worth killing the game prematurely.
