Satya Nadella Praises Xbox ‘Streamlining’ Amid Massive Studio Reshuffle and Layoffs

Microsoft CEO Satya Nadella has weighed in on the massive shifts rocking the Xbox division, describing the brand’s ongoing restructuring as "great to see" even as thousands of workers face layoffs across the gaming division.

Nadella Backs Division ‘Streamlining’ and Future Growth

Speaking on the Sources Podcast with Alex Heath, Nadella addressed the current state of Xbox following widespread cuts and organizational upheavals. Despite ongoing workforce reductions—which started with 1,600 cuts in July and are slated to include another 1,600 before the fiscal year wraps—Nadella expressed high confidence in the brand’s intellectual property and its future output.

"There’s a certain amount of streamlining the team is doing and [Xbox CEO Asha Sharma] is doing, which is great to see," Nadella said during the podcast. "And then, we have to invent the right sustainable business model that allows us to deliver gaming to more and more people."

Nadella emphasized that Microsoft still aims to serve as both a platform holder and a top-tier publisher across PC and Xbox hardware. According to Nadella, leadership plans to steer the Xbox brand back to growth in the upcoming fiscal year while continuing to deliver major game releases.

A Massive Overhaul Across Key Studios

The executive’s optimistic outlook arrives during a turbulent transitional period for Xbox’s first-party lineup. The ongoing restructuring has already put studios including Double Fine and Ninja Theory on course for closure or a spin-off, alongside shifting responsibilities for flagship franchises. Notably, the Halo series is moving from Halo Studios over to Activision teams, while the Fallout: New Vegas team at Obsidian Entertainment is shifting under Bethesda.

Meanwhile, State of Decay developer Undead Labs recently confirmed its move to independence, with studio head Philip Holt confirming to IGN that State of Decay 3 remains in active development despite significant staff cuts. While Nadella and Xbox leadership are eyeing long-term sustainability and a return to growth, players and developers alike are still waiting to see the full outcome of Xbox’s broader reset in the months ahead.