Xbox CEO Asha Sharma just dropped the memo that confirms what the spreadsheets have been screaming for years: the acquisition spree and Game Pass expansion left the division hemorrhaging money at a rate of 64 cents lost per dollar invested. Today marks the start of 3,200 job cuts—1,600 immediate—with four studios spun out entirely and more pain scheduled through fiscal 2027. Obsidian alone is shedding 60-70 staff, roughly a quarter of its workforce, hitting every discipline from art direction to QA on projects like Grounded 2 and The Outer Worlds DLC.

The same axe landed at Bethesda properties, with id Software reportedly losing most if not all of its coders and around half its headcount overall, while ZeniMax Online Studios took similar hits. Arkane is now in formal consultation under French labor rules to review “strategic options,” code for possible sale or further restructuring. Sharma’s own words frame it as the “most significant restructure in Xbox history,” admitting the bet on subscriptions and studio buying “spread ourselves too thin” while the core business weakened.

This isn’t abstract corporate theater—senior talent with a decade-plus at Obsidian is walking out the door, and remaining teams are staring at a “huge list of projects” with no clear path forward until tomorrow’s studio meeting. Sources inside the affected studios describe confusion over deliverables and no formal guidance yet on how work continues. The spin-offs of Double Fine and Compulsion to independence, plus sales of Ninja Theory and Undead Labs, signal Xbox is shrinking its footprint fast to stop the bleed.

Riley’s note: The receipts were there in every earnings call and Glassdoor post. Sharma finally read them out loud.