Reports suggest that Xbox is preparing to unveil a second wave of layoffs this week

Image credit: Xbox

Reports suggest that Xbox is expected to begin another phase of workforce reductions this week, as shared by The Information.

An insider revealed that the company plans to "merge several of its gaming divisions" as it continues with restructuring efforts.

VGC reported that this could involve integrations or internal adjustments among Xbox Game Studios, Bethesda, Activision, and Blizzard.

In July, Xbox initially announced intentions to reduce its workforce by 3,200 personnel. This first phase led to the dismissal of 1,600 employees, with substantial layoffs at Obsidian, Bethesda, Id Software, and Zenimax Online Studios.

The company divested from five internal studios: Compulsion Games, Double Fine Productions, Ninja Theory, Undead Labs, and Arkane.

Compulsion Games and Double Fine became independent entities. Ninja Theory and Undead Labs are in the process of being acquired, while Arkane Lyon has started a consultation phase.

According to Xbox CEO Asha Sharma, the restructuring is a response to the company "spreading itself too thin."

Sharma explained, "To expand, we made numerous strategic decisions. This led to a lack of focus on our core activities. The fundamental measure of any strategy is the allocation of resources, and we spread ours too thin."

In a communication to the staff, Sharma remarked that teams expanded by 40% with the advent of the current hardware cycle, whereas player numbers and gameplay hours dropped.

Sharma conveyed plans to streamline management, reducing layers to five, a move aimed at addressing issues of departments having up to 14 hierarchical levels.

"Our growing staff numbers led to fragmentation," Sharma elaborated. "Without unified goals, independent operations made alignment and decision-making challenging."

Sharma emphasized, "These changes aim at a more substantial future for Xbox, not a smaller one. Our aim is for Xbox to be among a select group of companies that engage more than a billion individuals daily, offering everyone a platform to create and connect."

"We can meet this objective. Xbox has achieved recognition as one of the most cherished series in entertainment history, with creative teams globally, and we anticipate a resurgence of growth in 2027."

Recently, Xbox unveiled plans to release Kojima Productions' forthcoming game, Physint, after a surprise exit from Sony was announced in mid-June.

Sharma described the expanded collaboration between Kojima Productions and Xbox as "a landmark event" for the corporation.