Ahead of CEO Asha Sharma's 'reset,' Xbox studio execs leave and studios shutter

Microsoft is shutting down or selling at least three Xbox studios—Ninja Theory, Double Fine, and Compulsion Games—as the gaming division steels itself for layoffs under new CEO Asha Sharma's "reset.

" The Verge and Bloomberg confirmed the moves on Monday, the same day two senior Xbox Game Studios leaders announced their exits.Ninja Theory got the news first. Staff at the Hellblade studio were told on a Monday call that it was closing, a source told The Verge, though they're scrambling to find a buyer. The blow lands barely a week after the Xbox Games Showcase, where Microsoft unveiled a new Hellblade game, Senua, for 2027.

Nobody seems to know what happens to it now.

Beloved studios are fighting to survive on their own terms

Double Fine isn't going quietly. The Psychonauts maker, founded by Tim Schafer in 2000, is in active talks to buy itself back rather than fold, per Bloomberg. Compulsion Games—the Montreal team behind We Happy Few and last year's South of Midnight—is angling for the same escape. And Bloomberg says more studios under the Xbox banner are quietly negotiating their futures.The reckoning traces back to a memo last week. Sharma and content chief Matt Booty warned staff of a "reset" over 100 days, conceding that Xbox had "over extended" its studio system.

The math was brutal: setting aside Activision Blizzard King, Microsoft poured more than $20 billion into Xbox over five years while annual revenue fell nearly half a billion. A hardware component crisis, they added, is only making things worse.

Leadership churn deepens the sense of upheaval

The studio cuts came packaged with departures at the top. Craig Duncan, who runs Xbox Game Studios after years leading Rare, is leaving, as is chief of staff Louise O'Connor, The Game Business reported.

Duncan had held the job since October 2024.Sharma, who took over from Phil Spencer in February, has moved fast. She cut Game Pass pricing and made Gears of War: E-Day and Clockwork Revolution Xbox console exclusives. Those bets on marquee franchises, though, appear to be funded by the smaller studios now on the block.The pattern is hard to miss. Microsoft spent years collecting studios—Ninja Theory and Compulsion both joined in 2018—before the record $69 billion Activision Blizzard deal. The spending spree built an empire. The reset is now dismantling pieces of it.