Microsoft Layoffs and Xbox Studio Shake-up: AI Pivot Sparks Fears for Rare and Undead Labs

Microsoft is implementing mass layoffs across its U.S. operations as the company shifts its strategic focus and investment toward artificial intelligence, according to reports from Infobae.

Which Xbox studios are facing potential closure?

Reports from Vandal, Diario AS, and Clavecd.es indicate that multiple development houses are currently at risk. Rare, the studio responsible for Sea of Thieves and Banjo-Kazooie, is reportedly “at risk” due to a restructuring of the Xbox division. Similarly, Undead Labs, the developer behind State of Decay 3, is reportedly under scrutiny from Microsoft leadership, according to Diario AS.

Additional reports from Clavecd.es suggest that Arkane may be facing closure.

What is happening with Marvel’s Blade and Rare?

The stability of specific high-profile projects is currently uncertain. Clavecd.es reports that Microsoft may cancel the development of Marvel’s Blade. Regarding Rare, reports from Instant Gaming News suggest that Microsoft is considering the sale of the studio, which would mark a significant departure from its previous acquisition strategy.

How does the AI shift impact Microsoft’s gaming division?

According to Infobae, the company is "betting everything" on AI, a move that has led to the current wave of mass layoffs in the United States.

The situation across the Xbox ecosystem remains fluid, with several studios and titles currently categorized as being in danger or under review.