Microsoft is reportedly gearing up to announce a significant wave of layoffs within its Xbox studios and among its employees in the upcoming week. Sources familiar with the company’s plans have revealed to The Verge that these layoffs will result in studio closures, spinoffs, potential mergers, and the cancellation of certain games.

Reports suggest that Microsoft is considering closing at least five studios, including those responsible for the development of Marvel’s Blade. Sources indicate that Microsoft is looking to scrap Blade as part of a broader cost-cutting and restructuring initiative within the Xbox gaming division.

Blade, developed by France-based Arkane Studios renowned for the Dishonored series, was initially slated for release later this year. However, sources familiar with the game’s progress reveal that the internal launch date has been pushed back to late 2027, with the project also exceeding its budget.

Alongside the potential cancellation of Blade, Microsoft is exploring the possibility of selling Arkane Studios. Recent reports have indicated that Microsoft is seeking to spin off Compulsion Games, Double Fine, and Ninja Theory, with discussions also underway to find a buyer for Undead Labs, the creators of State of Decay. These negotiations, however, may extend over several months.

Compulsion Games, the team behind South of Midnight, appears to be anticipating an imminent closure and has advised its employees to seek alternative job opportunities. Similarly, Ninja Theory employees have been notified of Microsoft’s intentions to either shut down the UK-based studio or spin it off.

Microsoft is reportedly bracing for a substantial round of layoffs at Xbox that will significantly reshape its gaming division. Sources suggest that these layoffs are scheduled to commence on July 6th and will impact various departments within Xbox. Speculations hint at a potential workforce reduction of at least 1,000 employees, with the closure of five studios alone affecting around 500 individuals.

These impending layoffs are part of a strategic “reset” for the Xbox division under the leadership of new CEO Asha Sharma, who recently alluded to the necessity of making tough decisions. Sharma has emphasized the need for a reevaluation of the Xbox business, highlighting her commitment to positioning Microsoft as the leading gaming and entertainment company in the industry.