Marvel's Blade and its developer, Arkane, are reportedly among the studios being considered for cancellation or closure, as Xbox enters a major reset.

Xbox is headed for a grim period ahead, with reports of multiple studio closures, potential game cancellations, incoming layoffs and more set to affect Microsoft's gaming division, according to The Verge. The shake-up is reportedly set to affect at least five studios, with some being considered for sale or spin offs.

One of the studios that is said to be affected is Arkane Studios, best known for creating the Dishonored series and the current developer behind Marvel's Blade. The game was originally planned for release this year, but has reportedly been pushed back to late 2027 and is also running over budget–likely contributing to the possibility of its cancellation.

The tech giant reportedly has other plans in store for several other studios. A report from Bloomberg claims it is looking to spin off Compulsion Games, Double Fine, and Ninja Theory. Meanwhile, GamesBeat reports that Microsoft is actively searching for buyers for Undead Labs, the developer behind State of Decay–meaning that the game itself could already be at risk. These studios are reportedly at the brink of closure if no buyers come forward.

Compulsion Games itself has not been optimistic, with the studio reportedly telling employees to begin looking for jobs elsewhere. Meanwhile, Ninja Theory has allegedly informed staff of its imminent closure or spin-off.

With this wave of drastic changes, mass layoffs appear inevitable. Almost a month ago, reports warned of incoming layoffs at Xbox amid the company's major business reset. The Verge has reinforced those claims, reporting that a significant round of layoffs is set to begin on 6 July, affecting most Xbox departments. It added that rumours estimate around 1,000 job losses, with a further 500 employees potentially affected if the five reported studio closures go ahead.

Additionally, Business Insider has reported that Microsoft is looking to make sweeping layoffs by cutting under 2.5% of its workforce, affecting thousands of roles, including those at Xbox. These layoffs could be announced next week, according to the outlet. 

Why is Xbox undergoing studio closures and layoffs?

Xbox CEO Asha Sharma published a lengthy post last month, outlining the company's current position and the challenges ahead. According to the post, the console company is facing financial difficulties amid declining revenue and rising hardware costs, the latter of which are expected to increase further later this year.

The CEO also cited growing competition across the entertainment industry and Xbox's recent strategic moves, which had led to overextension–something the company is now aggressively scaling back.

The wider gaming industry has also been facing difficult times, with layoffs affecting major companies including Electronic Arts, Riot Games, Bungie, Amazon Games, and Epic Games, alongside studio closures across the industry, including several within Sony's PlayStation division. Consumers have also seen widespread price increases, from PlayStation Plus subscription and Nintendo Switch 2 hardware price hikes to V-Bucks price changes in Fortnite, to name just a few.