Xbox in 2026 has been a roller coaster. Former CEO Phil Spencer retired, after Microsoft said he wouldn’t just a few months before. Exclusives returned to Xbox and a new console was announced. Game Pass dropped in price, but lost day one Call of Duty. It’s been a lot. Now there’s even more rumors of what is happening behind the scenes and it isn’t sounding good. What is real and what is just noise? Who even knows anymore. AI can make anything seem real, but there is some solid evidence behind some of these rumors.
The Xbox Reset Memo
On June 10, Xbox CEO Asha Sharma and chief content officer Matt Booty published a memo on Xbox Wire that the company is calling the Reset. The short version is that Xbox admits it overextended itself. Sharma wrote that the studio system grew too large while chasing subscriptions, streaming, and devices all at once, and that going forward, this cannot continue. She framed the next 100 days as the window for fixing it. Reading between the lines, a Reset in corporate language means more than a round of layoffs. It means deciding which studios stay open, which games survive, how Game Pass is priced, and how much Xbox content keeps shipping to PlayStation.
Xbox Layoffs in 2026
The layoffs are where confirmed fact and rumor blur together, so it is worth being careful. What is confirmed is grim enough. Ninja Theory, the studio behind Hellblade, has been closed. Compulsion Games, the team that made South of Midnight, has gone through layoffs, with its final fate still under negotiation. The Initiative, which spent years on the Perfect Dark reboot, was shut down, and Perfect Dark itself was canceled alongside Rare’s Everwild. All of that follows the roughly 9,000 jobs Microsoft cut across the company back in July 2025.
Then there is what is only reported so far. Bloomberg’s Jason Schreier has said a major round of Xbox layoffs is expected shortly after Microsoft’s fiscal year closes, which happens to be June 30, the day I am writing this. The Verge has heard that a studio closure or changes to the studio lineup could be part of it. Double Fine is reportedly in talks to spin off from Microsoft, and there is chatter that Undead Labs and State of Decay 3 could get caught up in the cuts. None of that last group is confirmed, and the enormous headcount numbers floating around social media are not backed by anything official. I would treat those as noise until Microsoft actually says something.
What Is Actually Leaving Game Pass
This is the part I think gets misunderstood the most. The headlines make it sound like Xbox is gutting Game Pass, but the reality is more specific. The big removal is Call of Duty. As part of the April 2026 changes, new Call of Duty games no longer hit Game Pass on day one. They launch at $69.99 and join the library about a year later, around the following holiday season. That is a genuine loss for anyone who subscribed mostly for launch-day Call of Duty.
The catalog itself is a different story. Games rotate in and out of Game Pass every month the way they always have, and by GameRant’s tracking, Game Pass added 47 more games than it removed in the first half of 2026. So the service is not shrinking, at least not yet. The bigger worry is future supply. Shams Jorjani, the CEO of Helldivers 2 studio Arrowhead, said in late June that Microsoft appears to have paused signing new Game Pass publishing deals. Existing deals are usually locked in months or even more than a year ahead, so the library has runway for a while, but a freeze now would show up later as thinner third-party additions.
The Xbox Series X and S Price Hike
On top of everything else, Xbox hardware is going up again. Starting August 1, the 512GB and 1TB Xbox Series X and S models are rising by $100 and $150 respectively, and the 2TB version is being discontinued. This is the third Xbox price increase in barely a year. Xbox is blaming rising storage and memory costs, which is at least partly fair given how much the AI boom has pushed up memory prices across the whole industry, including at Microsoft’s own Azure. Fair or not, raising console prices three times in a year while closing studios and trimming what Game Pass offers is a rough look for anyone still trying to buy into the ecosystem.
What I Think Is Really Going On
Here is my honest read. The Activision deal was supposed to make Xbox unstoppable, and instead it loaded the division with enormous costs and expectations it has not been able to meet. Game Pass was the whole pitch, every game on the service on day one, and it turned out that model quietly punished the studios making those games, because a subscription does not credit a studio the way a few million retail sales would. So games looked like underperformers on a spreadsheet even when plenty of people played them. South of Midnight reportedly pulled over a million players in three weeks, and Compulsion still got hit.
That is the part that frustrates me. These closures are not really about teams making bad games. Hellblade, Psychonauts, South of Midnight, none of those are the problem. The problem is a business model that Microsoft built, changed its mind about, and is now unwinding on the backs of the people who bought into it. Sharma inherited a mess she did not create, and cutting costs is probably the only move available to her, but it sucks to watch talented studios pay for decisions made far above them.
Whether the Reset works comes down to the next few months. If the promised focus on Halo, Fallout, Gears of War, and The Elder Scrolls actually produces great games, then great, but it could also mean we miss out on some great games because studios are shut down. Fewer studios and taking fewer risks may seem like the safe bet, but it also goes against what has been traditional Xbox style. Game Pass changed how people played games. Xbox Live changed online gaming. Risk is part of Xbox’s identity and a change to playing it safe doesn’t feel like a return to Xbox, like Sharma promised.
