Microsoft shares rise after Xbox shake-up plan includes thousands of job cuts, as Game Pass faces questions

Microsoft’s stock moved higher in overnight trading after reports of a broad restructuring of its Xbox video game business, including job cuts and changes to studio operations. The shift, described in a staff memo attributed to Xbox leadership, points to mounting pressure on the company’s gaming strategy, particularly its subscription push.

According to the report, Microsoft plans to cut roughly 3,200 jobs across its Xbox division. The memo cited in the article says about 1,600 of the cuts would happen this week, with around 1,250 more over the remainder of the fiscal year that began in July. Those cuts are characterized as about one-fifth of the division’s overall headcount.

The report also says Microsoft is pursuing changes to parts of its internal game-development footprint. It describes a plan to sell or spin off four studios and to explore options for a fifth. The studios listed include Ninja Theory, Undead Labs, Double Fine, Compulsion Games, and Arkane Studios, with the latter described as the one where strategic options are still being evaluated.

On the commercial side of gaming, the article highlights concerns about Microsoft’s Game Pass subscription service. Game Pass bundles access to a library of games, typically on a monthly fee, and is a core lever for Microsoft’s efforts to drive recurring revenue. The report says the Wall Street Journal, citing a person familiar with the matter, reported Game Pass has about 30 million users, well below an internal projection of about 77 million for this year.

The article further attributes the shortfall to a slower-than-expected pace, citing the Xbox CEO Asha Sharma’s memo to staff. The report says Sharma told employees that Game Pass “did not grow at the pace we expected.” The user and target figures, as described, were connected to materials revealed during legal proceedings related to Microsoft’s Activision acquisition.

Beyond the Xbox division, the report situates the restructuring against a tougher market backdrop for Microsoft stock. It says Microsoft shares were down sharply on a year-to-date basis and describes the first half of 2026 as its weakest among peers in the Magnificent Seven group. It also notes the company’s longer-term need to translate gaming investment into performance that supports its broader cloud and software business.

Microsoft did not provide additional detail in the post and related reporting described here on how the studio moves would be structured, what titles might be affected immediately, or what timeline management is targeting for the job cuts and any studio transactions. It also does not spell out whether Game Pass subscriber counts are measured by total memberships, paid subscribers, or a specific mix of markets and tiers.

What to watch next is whether Microsoft follows up with more concrete disclosures in filings or official communications, including how many roles are ultimately eliminated, which studios are targeted for sale or spin-off, and what changes the company makes to Game Pass growth strategy. Investors and industry watchers are likely to focus on any updated outlook for gaming profitability and on whether the restructuring stabilizes cash flow while preserving hit-making capability.