# Xbox Reportedly Canceling Marvel’s Blade, Closing 5+ Studios in Massive Restructuring
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**Microsoft’s Xbox division is heading into one of its most turbulent weeks ever. According to multiple reports, the company is preparing to cancel the highly-anticipated Marvel’s Blade game, close at least five studios, and lay off more than 1,000 employees starting July 6.**
## What’s Happening?
Industry sources tell The Verge’s Tom Warren that Microsoft is weighing a sweeping restructuring of its gaming division that includes:
– **Canceling Marvel’s Blade** — The Arkane Lyon-developed title was originally targeting a late 2026 launch but slipped to late 2027 and went over budget
– **Closing at least 5 studios** — Including Arkane (Dishonored, Deathloop), Compulsion Games (South of Midnight), Double Fine (Psychonauts 2), Ninja Theory (Hellblade), and Undead Labs (State of Decay)
– **Laying off 1,000+ employees** — With cuts hitting most parts of Xbox starting July 6
– **Spinning off or selling studios** — Microsoft is reportedly looking for buyers for some of these teams
The news comes just weeks after Xbox head Asha Sharma warned about “making hard choices” and described the Xbox business as “not healthy.”
## Studios at Risk
| Studio | Known For | Status |
|——–|———–|——–|
| Arkane Lyon | Marvel’s Blade, Dishonored | Game canceled, studio may be sold |
| Compulsion Games | South of Midnight, We Happy Few | Told employees to look for jobs |
| Ninja Theory | Hellblade: Senua’s Sacrifice | Microsoft wants to close or spin off |
| Double Fine | Psychonauts 2 | Exploring sale |
| Undead Labs | State of Decay | Actively seeking buyer |
## What Went Wrong?
Xbox has struggled to find its footing despite massive acquisitions. The $69 billion Activision Blizzard deal in 2023 was supposed to cement Xbox’s dominance, but instead, the division has seen repeated layoffs, studio closures, and underwhelming exclusive releases.
New CEO Asha Sharma, who took over gaming in early 2026, has been blunt about the challenges. She previously claimed her “mandate is not 30 percent accountability margins” but rather “to be the number one gaming and entertainment company.” However, these latest cuts suggest profitability pressures are very real.
For PC gamers, the implications are significant. Arkane’s titles have historically been PC-first experiences. The cancelation of Blade means losing what could have been a stunning single-player adventure. Ninja Theory’s Hellblade series was also beloved on PC.
## What’s Next?
Reports suggest Microsoft may announce the layoffs as early as July 6. Studio closures could follow over the coming weeks. If buyers are found for studios like Double Fine or Ninja Theory, they may survive as independent entities.
## FAQ
### Will this affect Xbox Game Pass?
It’s unclear yet, but fewer studios making games means fewer exclusives for Game Pass in the long run. Microsoft has already raised Game Pass prices earlier this year.
### Is Marvel’s Blade completely dead?
According to sources, Microsoft is actively weighing cancelation. Unless a buyer emerges for Arkane Lyon as a package deal, the Blade game is likely not coming to PC or consoles.
### What about existing Arkane games like Dishonored?
Existing titles will remain available on Steam and Xbox. However, don’t expect future content or sequels from these studios under Microsoft’s ownership.
### Should I still buy an Xbox?
The hardware isn’t going anywhere, but the software strategy is clearly in flux. For PC gamers, this doesn’t directly affect your ability to play Xbox titles — most are available on Windows anyway. But it does mean fewer Microsoft-published games in the pipeline.
## Final Verdict
This is a dark moment for Xbox and the wider games industry. Microsoft spent billions building a portfolio of beloved studios, and now it’s systematically dismantling them. For PC gamers who grew up on classics like Psychonauts, Hellblade, and Dishonored, this week’s news is genuinely heartbreaking.
**Score: N/A (News Report)**
**[Read our previous coverage: Xbox & PC Game Pass Price Hike — What It Means for Gamers](https://blog.pcmasterdeals.com/ai-inflation-is-real-macbook-pro-jumps-1000-and-xbox-prices-rise-in-july-2026/)**
**[Related: AI Memory Shortage Is Driving Up DDR5 & SSD Prices — What PC Gamers Need to Know](https://blog.pcmasterdeals.com/ai-memory-shortage-is-driving-up-ddr5-ssd-prices-what-pc-gamers-need-to-know/)**
*This post contains affiliate links. As an Amazon Associate, PC Master Deals earns from qualifying purchases.*