Microsoft’s recent workforce reductions and organizational changes within Xbox have intensified speculation about the division’s long-term direction and whether the tech giant intends to sell off its gaming unit. Despite sweeping layoffs impacting thousands of employees and the closure or divestiture of several studios, industry experts doubt Microsoft will sell Xbox as a whole.

Reports indicate that Xbox CEO Asha Sharma is accelerating development on flagship franchises such as The Elder Scrolls, Fallout, and Halo, even as the company sheds talent and cancels projects. The Information revealed that Microsoft has considered transforming Xbox into a wholly-owned subsidiary, potentially operating as a joint venture or being partially sold to external partners—a move that would fundamentally alter its current business structure.

Analysts emphasize the high acquisition costs as a significant barrier to any outright sale. Given Microsoft’s recent blockbuster purchase of Activision Blizzard for $69 billion and the extensive infrastructure supporting Xbox—including studios, hardware, and payroll—an entire buyout would likely require an investment in the hundreds of billions. Instead, the more plausible scenario involves Microsoft divesting select parts or studios of Xbox to streamline operations.

This pattern has already begun, with Microsoft selling Ninja Theory and Undead Labs to undisclosed buyers. Meanwhile, other studios like Double Fine and Compulsion have become independent, taking their intellectual properties alongside them. Further sales may include Arkane Lyon, known for developing Marvel’s Blade, although details on that process remain unclear. Market research expert Yoshio Osaki noted the likelihood of studios, IPs, or teams being sold or spun off individually rather than as a unified package.

Recent layoffs illustrate this ongoing restructuring: Obsidian Entertainment, responsible for Avowed and The Outer Worlds, lost a quarter of its staff, with Avowed 2 canceled and resources redirected to new Fallout projects. id Software, maker of Doom, was also significantly reduced. These cuts have unsettled Bethesda Game Studios employees, casting doubt on the progress of The Elder Scrolls 6.

With uncertainty clouding the gaming division, remaining Xbox employees face anxious months ahead while Microsoft navigates how best to balance development, profitability, and potential divestitures. The question remains who, if anyone, would buy Xbox outright amid these massive strategic shifts.