Game designer George Broussard has claimed that the upcoming Xbox layoffs could be 'the largest single layoff event in gaming history.' The co-founder of Apogee Software and co-creator of Duke Nukem said on X that he received a list of planned studio closures from an inside source at Xbox, though he declined to share it. Broussard warned that even studios not shut down would face layoffs, adding: 'Xbox is going to be supremely unpopular for a very long time.'
State of Decay 3 studio Undead Labs among those at risk
Broussard's claims align with a report by GamesBeat, which lists Undead Labs, developer of State Of Decay 3, as a studio that could be closed unless it finds a buyer. Microsoft acquired Undead Labs in 2018 after State Of Decay 2's launch. The studio's upcoming title, State Of Decay 3, was featured at the Xbox summer showcase with a 2027 release date and is also planned for PlayStation 5. Windows Central has corroborated that Undead Labs is likely to be offloaded.
Other studios reportedly facing closure
In addition to Undead Labs, three other studios are reportedly at risk: Ninja Theory (Hellblade: Senua's Sacrifice), Compulsion Games (South of Midnight), and Double Fine (Psychonauts 2). Bloomberg's Jason Schreier noted on ResetEra that none of these studios are guaranteed to close if they fail to find a buyer; they could be spun out of Xbox to regain independence, potentially saving some jobs. This occurred with Activision subsidiary Toys For Bob in 2024, which later maintained ties with Microsoft to develop a new Spyro game.
Xbox's fiscal year end and expected layoff timing
The layoffs are expected in early July, after Xbox's fiscal year concludes. This mirrors last year's pattern when Microsoft laid off about 9,100 employees company-wide, with approximately 4,000 from Xbox. Combined with prior layoffs, Xbox has cut about 6,000 jobs in under two years, a number expected to rise. Schreier also reported that Xbox has begun ending contracts with third-party vendors, though he later clarified that Assembly, Xbox's main PR agency, is undergoing its own reorganisation and its contract with Xbox remains unchanged.
Industry reaction and historical context
Broussard described the potential impact as 'devastation' that 'will reverberate like the meteor that took out the dinosaurs.' The layoffs, if confirmed, would surpass previous large-scale events in gaming, such as the closure of multiple studios by publishers in recent years. Microsoft has not publicly commented on the matter, but Xbox executives Asha Sharma and Matt Booty have previously discussed the need for a 'reset' within the business.
