Microsoft is reportedly planning to cancel Marvel’s Blade and close or sell Arkane Studios along with four other Xbox studios as part of a massive July 2026 restructuring that could affect over 1,000 jobs.
Microsoft is preparing the largest wave of cuts in Xbox history. According to a detailed report by The Verge’s Tom Warren, the company is weighing the cancellation of Marvel’s Blade and the closure or sale of its developer, Arkane Studios (Lyon, France). At least five studios are on the chopping block, with layoffs expected to begin on 6 July 2026, the day after Microsoft’s fiscal year closes.
What Is Marvel’s Blade and Why Is It at Risk?
Marvel’s Blade is a single-player, mature-rated, third-person action-adventure game set in Paris, first revealed at The Game Awards 2023. Developed by Arkane Lyon, the acclaimed studio behind Dishonored and Deathloop, Blade was one of Xbox’s most anticipated upcoming exclusives. No gameplay footage has ever been shown publicly.
According to The Verge’s sources, Blade was originally planned for a late 2026 internal launch window. That date slipped to late 2027, and the project has gone significantly over budget. These two factors, delays and cost overruns, reportedly pushed Microsoft to consider scrapping it entirely as part of a broader cost-cutting initiative across Xbox.
Didn’t Todd Howard Just Say Blade Was Fine?
The timeline makes this especially jarring. On 8 June, Arkane’s assistant art director Jean-Luc Monnet reassured fans on social media with a “Let us cook” GIF after the game was absent from Xbox Games Showcase. On 23 June, Bethesda’s Todd Howard told Entertainment Weekly: “I saw some stuff just yesterday [on 21 May] and the folks at Arkane are doing a really, really great job.”
Then, on 30 June, The Verge reported that Microsoft wants to cancel Blade as part of a wave of cost cuts and job losses planned for Xbox’s gaming division. The gap between those reassurances and the leaked plans is striking.
Which Studios Are Facing Closure?
The Verge, Bloomberg, and Kotaku have collectively identified at least five Xbox-owned studios at risk of being shut down or sold off:
| Studio | Notable Games | Reported Status |
|---|---|---|
| Arkane Studios (Lyon) | Dishonored, Deathloop, Marvel’s Blade | Closure or sale under consideration; Blade facing cancellation |
| Ninja Theory | Hellblade series, Senua | Closure communicated to staff; looking for buyer |
| Compulsion Games | We Happy Few, South of Midnight | Closure considered inevitable; staff advised to seek new jobs |
| Double Fine | Psychonauts, Psychonauts 2 | Negotiating independence with Microsoft |
| Undead Labs | State of Decay series | Microsoft actively seeking buyer (per GamesBeat) |
French journalist Sylvain Trinel claimed Arkane Lyon’s closure is already a done deal: “Remember the date: 01/07/26. That’s when the circus begins.” Microsoft has not officially confirmed any of these closures at time of writing.
The Ninja Theory Situation Is Especially Brutal
Ninja Theory unveiled Senua, a new action-adventure set in the Hellblade universe, at the Xbox Games Showcase on 7 June. Built in Unreal Engine 5 and announced for PC, PlayStation 5, and Xbox Series X|S with a 2027 release window, it was one of the showcase’s highlights. Studio head Dom Matthews described it as “a bold new step for Senua into the action-adventure space.”
Just eight days later, staff were told the studio is being shut down. According to Game File’s Stephen Totilo, Microsoft had already decided to sunset or sell Ninja Theory before the Senua reveal. The showcase presentation was reportedly a calculated move to attract potential buyers and investors. Whether Senua ever ships now depends entirely on whether an acquirer steps in.
The Scale of Xbox’s July Layoffs
The Verge and Bloomberg report that Xbox layoffs are set to begin on 6 July 2026. Industry sources suggest at least 1,000 positions will be eliminated across the division. If all five studios are shut down, roughly 500 employees would be directly affected by closures alone, with additional cuts expected across teams that remain.
This would mark the deepest cut since Microsoft completed its $69 billion acquisition of Activision Blizzard King in 2023. For context, Xbox closed Arkane Austin, Tango Gameworks, and Alpha Dog Games in 2024. In 2025, The Initiative was shut down and Perfect Dark was cancelled in a round affecting 9,000 Microsoft employees company-wide.
Asha Sharma’s “Xbox Reset” and the Numbers Behind It
These moves are part of a sweeping restructuring led by Asha Sharma, who replaced Phil Spencer as Xbox CEO in February 2026. Sharma has publicly acknowledged that Xbox is “not in a healthy place.” At Bloomberg Tech 2026, she outlined the scale of the problem:
- Excluding Activision Blizzard King, Xbox invested over $20 billion in the past five years while annual revenue dropped by roughly $500 million.
- Console storage and memory component costs have risen more than fivefold in two years.
- The studio portfolio expanded beyond what could be sustainably funded.
- Platform infrastructure became bloated with hundreds of legacy dependencies.
Sharma’s memo to staff warned that “difficult choices” were coming. Those choices are now arriving.
Console Prices Are Rising Too
The bad news extends beyond studio closures. Starting 1 August 2026, all Xbox console models will see a global price increase. The Xbox Series X 1 TB will climb to $800, its highest point this generation. The 2 TB Galaxy Black special edition is being discontinued entirely. This is Xbox’s third major price hike in the past year.
Meanwhile, GamesRadar reports that PS5 captures up to 80% of launch-window sales for AAA single-player console games, underscoring the competitive pressure Xbox faces.
A Pattern of Buying and Closing
Microsoft spent an unprecedented amount acquiring studios between 2018 and 2023: Ninja Theory (2018), Double Fine (2019), ZeniMax/Bethesda (2021), and Activision Blizzard (2023). The promise was a content-rich ecosystem driven by diverse creative talent. Instead, the company has now closed or is closing many of those same studios.
Arkane Austin (Prey) was shut down in 2024 after the Redfall disaster. Tango Gameworks (Hi-Fi RUSH) was closed in the same wave and later rescued by Krafton. The Initiative (Perfect Dark) was shut in 2025. Now Arkane Lyon, Ninja Theory, Double Fine, Compulsion Games, and Undead Labs face the same fate.
Xbox Studios head Craig Duncan has also reportedly departed. The pattern raises serious questions about Microsoft’s ability to manage creative studios under a corporate framework optimized for recurring-revenue services.
What Players Are Asking
Is Marvel’s Blade definitely cancelled?
No official cancellation has been announced. However, The Verge reports that Microsoft wants to cancel Blade as part of its cost-cutting plan. If a buyer acquires Arkane, the game could theoretically continue under new ownership. The situation remains fluid.
Could Arkane Studios survive under a new owner?
Microsoft is reportedly exploring sale options alongside outright closure. If a buyer steps in, Arkane could operate independently. But these negotiations may take months, and significant layoffs are likely even in a sale scenario.
Will Ninja Theory’s Senua still release?
Senua was announced on 7 June 2026 with a 2027 window. With the studio facing closure, the game’s future depends on whether a buyer is found. The reveal was reportedly designed to attract investors, so Microsoft clearly sees the IP as having acquisition value.
Are major studios like Bethesda Game Studios or id Software affected?
Current reports suggest the five named studios are the primary targets. Core studios behind flagship franchises (Elder Scrolls, Doom, Call of Duty, Halo) appear to be unaffected by the closures, though broader layoffs could still touch teams across Xbox.
When will Microsoft officially confirm these closures?
Layoffs are expected to start the week of 6 July 2026. Microsoft typically announces such decisions alongside the actual cuts, so official confirmation could come imminently. The company has not commented publicly on the studio-specific reports.
