As part of sweeping Xbox layoffs planned to start on July 6, Microsoft is considering shutting down Arkane Studios and canceling the Blade game its been working on since the end of 2023, according to Tom Warren at The Verge. Combine this with previous reports from Bloomberg and GamesBeat, and it looks like Microsoft is preparing to close or sell off five studios next week: Compulsion Games, Double Fine, Ninja Theory, Undead Labs and Arkane.

There hasn’t been an update on Marvel’s Blade in more than two years, despite our quiet anticipation, and Verge reports that the game is over budget and facing delays. Xbox is exploring options to sell Arkane, similar to its reported approach with Compulsion, Double Fine, Ninja Theory and Undead Labs.

The entire Xbox division is bracing for layoffs following a memo from new CEO Asha Sharma and Chief Content Officer Matt Booty that warned, “We have found ourselves over-extended…. Going forward, this cannot continue.” Xbox union members represented by CWA have expressed their disappointment and frustration with Microsoft leadership ahead of the firings, calling for good-faith negotiations and transparency.

Arkane Studios is better known as Arkane Lyon, the maker of the Dishonored series and Deathloop, and the team is known for crafting polished first-person stealth experiences in stylish environments. Microsoft shut down Lyon’s sister studio Arkane Austin, which was responsible for Prey (yay) and Redfall (oh no), as part of a wave of Xbox layoffs and studio closures in 2024. 

At the time, Arkane Lyon co-creative director Dinga Bakaba shared the following message: 

“This is absolutely terrible. Permission to be human: To any executive reading this, friendly reminder that video games are an entertainment/cultural industry, and your business as a corporation is to take care of your artists/entertainers and help them create value for you. Don’t throw us into gold fever gambits, don’t use us as strawmen for miscalculations/blind spots, don’t make our work environments Darwinist jungles. You say we make you proud when we make a good game. Make us proud when times are tough. We know you can, we seen it before.”

The video game market lost an estimated 14,600 employees to mass firings in 2024, following an already staggering loss of roughly 10,500 in 2023, according to the Game Industry Layoffs tracker.

Microsoft’s $69 billion purchase of Activision Blizzard King — the largest acquisition in the industry’s history — was finalized in 2023, following the company’s $7.5 billion purchase of ZeniMax (including Arkane Studios) in 2021 and previous studio-buying sprees. 

In January 2024, Microsoft slashed 1,900 jobs across Xbox, Activision, Blizzard and ZeniMax, kicking off another terrible year for layoffs in gaming. Xbox shut down Arkane Austin and Alpha Dog Games, sold off Tango Gameworks, and fired an additional 650 employees in 2024. The Xbox division was again rocked by layoffs and studio shutdowns in the summer of 2025, when Microsoft laid off 9,000 employees across the broader company.

It appears that the coming 2026 Xbox layoffs have already affected Hitman and 007 First Light developer IO Interactive, which was reportedly working on a fantasy game with Xbox as its publisher. IOI announced that its relationship with “an external partner” recently ended and it had to reduce staffing as a result. On the flipside, Kojima Productions’ game OD, which is being published by Xbox, will not be affected by the layoffs, according to IGN.