Microsoft CEO Satya Nadella has described the ongoing Xbox layoffs totaling more than 5,750 positions since the 2023 Activision Blizzard acquisition as 'streamlining' under new Xbox leader Asha Sharma, calling the effort 'great to see' in a recent podcast appearance.

The cuts, which include the divestment or shuttering of studios such as Double Fine, Compulsion Games, Undead Labs, and Ninja Theory alongside earlier closures like Tango Gameworks and Arkane Austin, come as Xbox reports operating margins three to ten times lower than comparable businesses and a recent quarterly revenue decline.

Sharma's internal memo noted the division's business 'is not healthy' and outlined a phased reduction of 3,200 Xbox roles through fiscal 2027, with 1,600 already eliminated and four studios transitioning to independent management to preserve IP and ongoing projects.

Nadella expressed confidence in the remaining IP portfolio and the need to develop a sustainable model for broader gaming access, even as hardware challenges persist amid broader company investments.