Xbox is Closing Double Fine, Ninja Theory & Compulsion Games in 2026

Microsoft is reportedly preparing to shut down or sell off several beloved Xbox Game Studios, including Double Fine, Ninja Theory, and Compulsion Games, as part of a sweeping business overhaul in 2026. Here's a clear breakdown of what's happening, why it's happening, and what it means for Xbox gamers.

What Studios Are Being Shut Down?

According to reports from Bloomberg and The Verge, three Xbox-owned studios are currently "at risk of being shuttered":

• Ninja Theory, the team behind the critically acclaimed Hellblade series

• Double Fine Productions is known for Psychonauts and the recent puzzle game Keeper

• Compulsion Games: the Montreal-based studio that made South of Midnight and We Happy Few

These studios are reportedly in "active negotiations to spin off" from Xbox, meaning they may try to buy themselves back from Microsoft and become independent developers. However, Bloomberg sources confirm that even if a buyout deal is reached, significant layoffs are still expected.

Why Is Microsoft Doing This?

The closures are part of what insiders are calling the "Xbox 100-Day Reset", a major restructuring plan led by new Xbox CEO Asha Sharma. The situation behind this reset is serious:

• Microsoft spent over $20 billion on Xbox content, platforms, and hardware subsidies over five years

• Despite that, annual Xbox revenue (excluding Activision Blizzard) declined by nearly $500 million

• Xbox's profit margin has reportedly collapsed to just 3%

• Console hardware costs are projected to spike dramatically by the 2027 holiday season

Xbox CEO Asha Sharma stated bluntly that Xbox is "not in a healthy spot" and needs a full reset. Major layoffs, potentially up to 1,000 jobs, are expected in July 2026, right after Microsoft's fiscal year closes on June 30.

The Studios That Are Most at Risk

Ninja Theory (Hellblade, Senua's Saga)

Ninja Theory's situation appears the most dire. Staff were reportedly told the studio is closing, though employees are "hoping the studio will find a buyer." This is particularly shocking because Ninja Theory just unveiled a new Hellblade game called Senua* at the Xbox 2026 Summer Games Showcase, just days before the closure news broke.

Double Fine Productions (Psychonauts, Keeper, Kiln)

Double Fine's leadership is actively negotiating to buy the studio back from Microsoft. Their most recent games, Keeper and the party brawler Kiln, were well-reviewed but did not achieve major commercial success, which appears to be driving Microsoft's decision.

Compulsion Games (South of Midnight, We Happy Few)

Compulsion Games' closure is especially painful given its recent success. The studio won seven awards at the 2026 Canadian Game Awards, including Game of the Year, for South of Midnight, just weeks before the shutdown report surfaced. The studio employs over 90 people and is based in Montreal, Canada.

Who Else Is Affected?

The shake-up goes beyond just studio closures. Craig Duncan, the head of Xbox Game Studios, is reportedly leaving Microsoft after only 18 months in the role, along with chief of staff Louise O'Connor. Reports also suggest Microsoft is considering making Xbox a subsidiary of Microsoft while doubling down on its biggest franchises, Halo, Fallout, and The Elder Scrolls. Last year, Xbox already shut down The Initiative and cancelled both Perfect Dark and Everwild.

What Does This Mean for Xbox Gamers?

If you're an Xbox player, here's what matters to you right now:

• Games from these studios (Hellblade, South of Midnight, Psychonauts) will likely remain on Xbox Game Pass and be available for purchase.

• The planned new Hellblade game, Senua* (announced for 2027), is uncertain; its future depends on whether Ninja Theory finds a buyer.

• Microsoft is shifting focus to its biggest, most profitable IPs, so expect more Halo, Fallout, and Elder Scrolls content going forward.

• Game Pass subscribers should check their library and download titles from these studios while they're still available.

Find Xbox Game Deals on Cdkeycompares

If you want to grab games from Double Fine, Ninja Theory, or Compulsion Games before their future becomes uncertain, now is a great time. Use Cdkeycompares to compare prices on Xbox game keys and Xbox Game Pass subscriptions across multiple stores and make sure you're always getting the best deal.

Frequently Asked Questions (FAQs)

Q1: Is Ninja Theory shutting down in 2026?

Ans: Yes, according to reports from The Verge and Bloomberg, Ninja Theory staff were told the studio is closing. However, the team is hoping to find a buyer to keep the studio alive.

Q2: Is Double Fine closing?

Ans: Double Fine is currently in active negotiations to buy itself back from Microsoft and become an independent studio. No official closure has been confirmed yet.

Q3: Is Compulsion Games closing?

Ans: Compulsion Games is reportedly being shut down by Microsoft as part of the Xbox restructuring. Leadership is in negotiations, but over 90 jobs are expected to be affected.

Q4: Why is Xbox closing studios in 2026?

Ans: Xbox's profit margins have fallen to around 3%, and the division spent over $20 billion without growing revenue. New CEO Asha Sharma launched a "100-Day Reset" to cut costs and refocus on Xbox's most profitable game franchises.

Q5: When are the Xbox layoffs happening?

Ans: Major Xbox layoffs are expected in July 2026, shortly after Microsoft's fiscal year ends on June 30, 2026.