Xbox appears to have begun layoffs as part of a broader restructuring effort, with multiple employees from Compulsion Games, the studio behind the upcoming game South of Midnight, announcing their departures on social media. The layoffs were first reported by Windows Central on June 27, 2026, citing sources familiar with the matter.
Compulsion Games, based in Montreal, Canada, was acquired by Microsoft in 2018. The studio is currently developing South of Midnight, a third-person action-adventure game set in the American South, which was showcased during the Xbox Games Showcase in early June 2026. The departures include several developers who worked on the project, though the exact number of affected employees has not been confirmed.
Microsoft has not officially commented on the layoffs at Compulsion Games. The restructuring is part of a broader cost-cutting initiative across Microsoft's gaming division, following earlier layoffs in 2024 and 2025 that affected thousands of employees at Activision Blizzard, Xbox, and ZeniMax Media.
