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Xbox Arkane Restructuring Reports Raise Fresh Concerns
Microsoft is reportedly preparing another major restructuring across Xbox, with new reports claiming the company is weighing further studio closures, layoffs, mergers, spinoffs, and cancelled projects.
According to The Verge, the next wave of Xbox layoffs is expected to begin on July 6 and could affect most parts of the gaming division. The report claims Microsoft is considering closing at least five studios as part of a wider cost-cutting effort.
One of the most worrying names mentioned is Arkane Studios, the France-based team behind Marvel’s Blade, with previous communications painting a more positive picture.
Marvel’s Blade Is Reportedly Over Budget and Delayed
The suggestion is that Microsoft wants to cancel Marvel’s Blade as part of its wider Xbox cost reductions. The project was originally revealed with great excitement, especially given the studio’s history with immersive sims and stylish first-person action, which made it feel like a fascinating match for Blade.
However, the report claims the game has slipped internally to late 2027 and is running over budget. That makes the situation especially surprising. Marvel’s Blade had been seen as one of Xbox’s more distinctive upcoming projects, combining a major Marvel character with a studio known for games such as Dishonored and Deathloop.
Microsoft Is Reportedly Exploring an Arkane Sale
The same report claims Microsoft is not only weighing cancellation for Marvel’s Blade, but also exploring options to sell Arkane. That could theoretically allow the studio to survive outside Xbox, depending on whether a buyer emerges. However, it would make the future of Marvel’s Blade far more complicated, since the game involves Marvel licensing, Microsoft publishing, and Arkane’s current development work.
The studio already suffered a major loss when Arkane Austin was closed in 2024 after Redfall. The possibility of further cuts to the wider identity would be another major blow to one of the industry’s most respected creative names.
Other Xbox Studios Are Also Reportedly Under Pressure
Arkane is not the only studio reportedly being discussed. Earlier reports revealed that Microsoft has been trying to spin off Compulsion Games, Double Fine Productions, and Ninja Theory. Microsoft is reportedly also looking for a buyer for Undead Labs, the studio behind State of Decay.
If those moves go ahead, they would mark one of the most dramatic reshaping efforts in Xbox Game Studios’ recent history. The concern is not only about job losses, but also about what kinds of games Xbox is willing to fund moving forward.
OD Appears to Remain Safe for Now
One notable project reportedly outside the immediate danger zone is OD, the horror collaboration between Hideo Kojima and Xbox. That does not make the broader restructuring any less serious, but it suggests Microsoft may still be protecting projects it considers strategically valuable or prestigious.
For now, the uncertainty around Arkane and Marvel’s Blade is the clearest flashpoint. Until Microsoft makes a public comment, the report remains unconfirmed. Even so, the possibility that Xbox could cancel one of its most anticipated Marvel projects while weighing the future of Arkane will only intensify concerns around the division’s next reset.
