Corporate leadership changes rarely come without internal shakeups, reorganizations, and layoffs, and Xbox appears to be going through that right now.

Just a few months after longtime Xbox head Phil Spencer left the company and former AI executive Asha Sharma was put in charge, the gaming world received a duet of news stories from Xbox that paint a bleak picture of the internal state of Microsoft's gaming division. To start, news came on Monday morning that Xbox Game Studios head Craig Duncan and chief of staff Louise O'Connor had departed the company, per The Game Business. Then, a few hours later, Kotaku reported that Compulsion Games, developer of 2025 critical darling South of Midnight, was going through the process of being shut down.

It should be noted that this is very much a developing situation. Xbox has not officially confirmed the shutdown of Compulsion, and Kotaku reporter Rebekah Valentine noted on social media that studio leadership is in some sort of "negotations" with Microsoft over the fate of the development team. However, at least one Compulsion employee posted on social media today that they are looking for work.

Still, even with as much as we don't know right now, it doesn't feel like speculation to say things are difficult at Xbox right now, despite company leadership painting a more rosy picture publicly in recent months. For example, Xbox has been teasing its next console, dubbed "Project Helix," since March. The device was first hinted at in an interview with Mashable last year, and more recently, Xbox has sent Project Helix merch to some influencers and content creators. Xbox also recently started walking back its policy of allowing some first-party games to release on competing platforms, which could arguably be seen as a way to win the hearts and minds of longtime Xbox devotees.

Those gestures suggest that Microsoft is serious about the future of the Xbox brand, but more layoffs are also widely expected to come in the near future, per Bloomberg. Broadly speaking, Xbox has had a difficult time maintaining a steady cadence of game releases in recent years, and studio closures and layoffs are unlikely to help with that in the short term. There's also the longer-term question of the company's reputation among consumers; between game cancelations, studio closures, and Xbox's prominent place on the BDS boycott list due to Microsoft's relationship with the Israeli military, anecdotally I can say several people I know have sworn off of Xbox products for the time being.

It will be interesting to see if anything that happens over the next year or two can change that trend.