Published 10:39 1 Jul 2026 GMT+1

5 Xbox Studios Set For Potential Closure Amid ‘Massive’ Industry-Changing Layoffs

Microsoft could be closing more studios in 2026.

Richard Breslin

According to recent reports, it looks like Microsoft is getting ready to close even more studios in 2026, with bleak times ahead for many developers due to extreme cost-cutting measures.

By now, we all know that the video game industry is ruthless when it comes to making money. Heck, even when the likes of Microsoft and Sony announce record profits, sadly, it’s often followed by a round of employee layoffs and, in some cases, entire studios being closed down.

Why Do Video Game Companies Shut Down Game Studios?

There could be several reasons; the most logical reason is that a studio isn't turning a profit and essentially becomes a financial sinkhole. The other, which is the most cynical, often follows the aforementioned announcement of record profits.

Not exclusive to the likes of Sony and Microsoft, mega corporations seem to care only about making record profits year after year. While that may be a sustainable concept for a year or two, it’s practically impossible for the long haul.

When a company announces record profits, especially huge profits, employees may lose their jobs, which gives the impression that even more money will be made the following year. This deceiving profit increase is largely due to not needing to pay as many employees as wages, more than the profits made from a new video game release.

Every Video Game Studio Microsoft Has Closed in Recent Years

2024

Arkane Austin in May 2024. This studio was best known for the colossal vampire co-op flop, Redfall, but also also helped its big brother, Arkane Studios, on the likes of the Disnonored series.
Tango Gameworks in May 2024. This studio was best known for the survival horror series The Evil Within, as well as Ghostwire: Tokyo, and the surprise hit of 2023, Hi-Fi Rush.
Alpha Dog Games in May 2024. This studio was best known for the mobile game Mighty DOOM.
Roundhouse Studios in May 2024. While this studio never released its own game for Microsoft, it did lend a helping hand on the likes of DOOM Eternal. It was absorbed into ZeniMax Online Studios, the developer responsible for The Elder Scrolls Online.
The Initiative in July 2025. This studio was developing the Perfect Dark reboot, and it’s widely believed that the game was far into its development before the developer was closed down. Alix Wilton Regan, who was to play the lead protagonist, Joanna Dark, expressed her disappointment to us in an interview.

Microsoft Studios Reportedly Set to Close in 2026 Amid Xbox Restructuring

While the closure of these studios is yet to be officially confirmed by Microsoft, sadly, in these kinds of cases, there is often no smoke without fire. Especially when a reputable video game journalist, Jason Schreier, is reporting that a new wave of mass redundancies is on the way.

Ninja Theory, best known for the Hellblade series, 2010’s DmC: Devil May Cry and Enslaved: Odyssey to the West.
Double Fine Productions is best known for Psychonauts, Grim Fandango, Brutal Legend and Broken Sword.
Compulsion Games is best known for We Happy Few and South of Midnight.
Undead Labs is best known for the State of Decay series.
Arkane Studios, the developer responsible for the likes of the Dishhonored series, Deathloop and the upcoming, and seemingly troubled, Marvel’s Blade.