By Jen Glennon Published Jun 30, 2026, 4:34 PM EDT Analysis It's been a tough few weeks for Team Green
New Xbox CEO pledges 'renewed commitment' to consoles, says she’s against 'soulless AI slop' 007 First Light developer faces layoffs after Xbox pulls support for upcoming fantasy game Xbox might shut down Arkane Studios and its Blade game as part of upcoming layoffs What's happening at Xbox? Every change, rumor, and canceled game in a turbulent month Photo: Henry Hargreaves for Polygon Sign in to your Polygon.com account The last several months have been a roller coaster for Xbox. Microsoft's gaming division saw a major leadership turnover back in February, with CEO Phil Spencer abruptly leaving the company along with his heir apparent Sarah Bond. Incoming CEO Asha Sharma and chief content officer Matt Booty moved quickly to reestablish trust in the flagging brand. They ditched the unpopular and confusing " This is an Xbox " advertising campaign. They cut prices on Xbox Game Pass after a 50% price hike sparked an exodus from the service. They reaffirmed that new high-end hardware was in the works, in the form of Project Helix . They boldly declared that their organization would no longer be called "Microsoft Gaming" (nerdish, uncool) and instead adopt an all-caps XBOX (shouty, uncool in a different way). Xbox hosted a barnstorming summer showcase on June 7, and gave away hundreds of translucent green Series X consoles to fans who attended live.
It seemed like everything was going great! And then the wheels promptly fell off the wagon. Just three days after the showcase, on June 10, Bloomberg reported that Sharma had planned a massive slate of layoffs that would begin in July. Sharma and Booty essentially confirmed these reports in a post on Xbox Wire that outlined plans for an "Xbox reset" over the coming 100 days, citing lousy revenue, increasing hardware costs, and excessive expansion during the pandemic years.
It may take weeks or even months until we get an exact picture of all the changes taking place at Xbox, but here's what we know at present. The stories below are presented in reverse chronological order, so the newest developments will appear at the top.
On June 30, IO Interactive cryptically announced on X that a "relationship with an external partner on our own IP, Project Fantasy, has come to an end." It was soon confirmed that Xbox was the external partner pulling out of the deal. IO will continue developing Project Fantasy, but said it will have to make "staffing decisions" in response to the funding change, which doesn't sound great.
Image: Arkane Studios/Microsoft Marvel's beloved vampire badass just can't catch a break lately. On June 30, The Verge reported that Microsoft is considering shutting down Arkane Studios , best known for the Dishonored series, Deathloop , and Prey (2017). That would also mean the end of Arkane’s upcoming game based on the comic book icon. Marvel’s Blade was originally supposed to debut later this year, but its internal ship date has allegedly slipped to late 2027.
On July 29, GamesBeat reported that Undead Labs, alongside the three previously named studios — Compulsion Games, Double Fine, and Ninja Theory — was at risk of closure . Undead Labs is currently working on State of Decay 3, which was featured in Xbox's June 7 showcase and slated to release sometime in 2027.
On June 29, a variety of reports claimed that Xbox was planning further adjustments to Game P…