Xbox Layoffs Begin at Compulsion Games as Studio's Future Hangs in the Balance

Xbox layoffs are underway, with developers at South of Midnight studio Compulsion Games posting on LinkedIn that they are no longer with the company. The cuts mark the opening move in a sweeping restructuring under new Xbox CEO Asha Sharma, who has promised a full "reset" of the business to get Xbox "healthy" again.

The individual departures were compiled by reporter Mr Rebs from LinkedIn posts, making this the first concrete evidence that the post-fiscal-year layoffs Bloomberg had flagged are now happening. Bloomberg had previously reported that significant cuts would likely follow June 30, the end of Microsoft's fiscal year. The fate of Compulsion as a whole remains unresolved — earlier June reports said Xbox was preparing to close the studio outright, but Compulsion leadership was reportedly in talks to spin off as an independent studio instead.

Compulsion is not alone in that precarious position. Double Fine and Ninja Theory are also said to be in negotiations to break away from Microsoft ownership and avoid full closure. The situation at Double Fine drew attention recently when the studio's X account posted a single, ambiguous emoji — hardly a reassuring signal. Xbox has been shedding studios at an alarming rate over the past couple of years, with high-profile closures including Arkane Austin and Tango Gameworks in 2024 drawing widespread criticism from the gaming community.

No official statement from Xbox or Compulsion has confirmed the layoffs or clarified the studio's direction. With Microsoft's new fiscal year now underway, more announcements — whether closures, spin-offs, or further cuts across other studios — are likely coming soon.