Microsoft is planning a massive restructuring over at Xbox, and a new report claims that part of its upcoming layoffs is the shutting down of Arkane and the cancellation of its development of "Marvel's Blade."
Arkane Studios, based in Lyon, France, became part of Xbox through Microsoft's $7.5 billion acquisition of ZeniMax Media in 2021.
Xbox Layoffs: Arkane Is Reportedly Shutting Down
The report comes from The Verge, which cited sources familiar with Microsoft's plans who claim that Xbox's restructuring includes the shutdown of several game studios, including Arkane.
Nothing has been officially confirmed by Xbox or Arkane at this time, though the timing lines up with a broader restructuring effort that has been building for weeks.
The studio is best known for the "Dishonored" series and the critically acclaimed "Deathloop," which launched as a PlayStation 5 console exclusive before coming to Xbox.
This would not be the first Arkane studio Microsoft has shuttered as its American branch, Arkane Austin, known for the 2017 game "Prey," was closed in 2024 alongside other Bethesda teams, including Roundhouse Studios and Tango Gameworks.
Arkane Studios is one of at least five studios reportedly on the chopping block as part of a larger Xbox reset, which also includes Compulsion Games, Double Fine, Ninja Theory, and Undead Labs.
Microsoft is said to be exploring the option of selling some of these studios rather than closing them outright, similar to how Tango Gameworks was sold to a new publisher in 2024 after initially being shut down.
'Marvel's Blade' May be Canceled
"Marvel's Blade" was first announced at The Game Awards in December 2023, described as a single-player, mature-rated third-person action-adventure game set in Paris. Full production on the game reportedly began in 2024, and no gameplay footage has been shown publicly since the original announcement trailer.
According to The Verge (via IGN), "Marvel's Blade" was originally intended to release in 2026 but slipped internally to a late 2027 window. The game has since gone over budget, which appears to be a key reason behind the potential cancellation.
The news is particularly striking because Bethesda's Todd Howard spoke positively about the game just weeks ago, saying the Arkane team was doing a "really, really great job" and that he liked what he had seen of it.
Arkane developers had also publicly stated that development was progressing well and asked fans for patience. Those statements now sit awkwardly against the latest reporting, highlighting how quickly the situation at Xbox appears to have shifted.
Massive Changes Coming to Xbox
The expected layoffs are described by multiple outlets as one of the largest single waves of cuts the gaming industry has seen. Reports indicate the closures and job losses are set to begin around July 6, with Microsoft using the term Xbox reset to describe the overall restructuring effort internally.
Xbox has been struggling to find a clear identity throughout the current console generation, failing to compete with rivals like Nintendo and PlayStation while a string of high-profile games has been canceled or delayed over the past several years.
"Perfect Dark" was canceled in 2025 after five years of development, leading to the closure of The Initiative. The "Blade" situation feels familiar to longtime Xbox watchers, who have seen the company acquire studios, generate excitement around their projects, and then shut them down before those games ever reach players.
The broader situation around "Marvel's Blade" is also complicated by the fact that Marvel's own film version of the character has been stuck in development hell for years, with two directors having departed the project and no current release date confirmed for the movie either.
