The news: Microsoft cut 4,800 jobs, with the Xbox division absorbing 3,200 of those layoffs, or 20% of its employees. Half of the Xbox reductions occurred Monday; the remaining 1,600 will exit through fiscal 2027 as part of yearslong layoffs and realignment, per CNBC.

In addition, Microsoft is spinning out Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Labs as independent studios, and each will retain its existing game catalog. 

Microsoft shares closed at about $388 Tuesday and remain roughly 20% below where they were at the beginning of 2026, per Yahoo. 

Why it’s worth watching: Microsoft said Xbox Game Pass lost “millions of subscribers” after it increased Game Pass Ultimate prices 50% in October 2025 to $29.99, versus PlayStation Premium at $17.99, per IGN. In the same month, It started internally testing a free ad-supported tier that displayed two minutes of pre-roll ads before cloud gaming sessions, with a one-hour limit and five free hours monthly.

• The new unskippable format gives advertisers access to a captive audience that was previously unreachable. The monthly cap lets brands sequence campaigns across multiple sessions, building frequency without oversaturation.
• But ongoing restructuring creates risk: Layoffs, studio divestitures, and an overwhelmed leadership team could reduce platform stability, ad inventory quality, and partnership support once the ad tier rolls out later this year, per CNET.

Implications for advertisers: Xbox’s restructuring could result in delayed campaign support and ad inventory shortages for the near future.

Advertisers might bypass Microsoft by going directly to spun-out studios. Double Fine, Compulsion, Ninja Theory, and Undead Labs can pursue independent brand deals for native integrations, sponsored content, or in-game placements, skirting Xbox’s operational turmoil.

When pre-roll ads go live, brands should run trials with modest spending but include a cancellation clause to pull spend quickly if performance lags. Assess early results against CPM benchmarks and adjust bids or creative as user volume grows.

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