Xbox Layoffs Reportedly Set to Be Significant as Compulsion Games Faces Shutdown Claims

Xbox is once again facing reports of major layoffs, with new claims suggesting the next round of cuts will be significant and could include the closure of Compulsion Games, the studio behind South of Midnight.

Bloomberg previously reported that Microsoft was preparing Xbox layoffs near the end of June, and the latest claims now suggest the impact could be wider than expected. The timing also matters because Microsoft’s fiscal year ends on June 30, 2026, which has increased concern across the gaming industry.

Insider-Gaming and Kotaku have both reported that Compulsion Games could be shut down, while insider NateTheHate has also claimed that the studio was informed about its situation last week. Bloomberg’s Jason Schreier added that the whole studio was told on Friday about what was happening, though he did not share further details.

Kotaku later updated its report to say Compulsion’s leadership is in talks with Xbox, although the exact nature of those talks remains unclear. These discussions suggest the studio’s future has not been publicly settled yet.

Arkane Lyon has also been mentioned in separate reports as a studio worried about its future, although no confirmed shutdown has been announced. For now, Xbox fans and developers are waiting for Microsoft to officially explain the scale of the cuts.