Xbox is preparing to dismiss hundreds of employees this week, marking the second large-scale headcount reduction for the gaming division this year, according to a person familiar with the matter. The source indicated that the Microsoft-owned business also intends to consolidate several of its game development studios.

Xbox Chief Executive Officer Asha Sharma had informed staff in July that an additional 1,600 positions would be cut before the end of the year, following the elimination of 1,600 jobs earlier that same month. During that period, Xbox also sold off four of its studio subsidiaries. A spokesperson for Xbox did not immediately respond to requests for comment.

The latest round of job cuts and restructuring comes as Sharma aims to boost profit margins within the gaming segment. She is steering Xbox toward increased investment in new installments of major intellectual properties such as The Elder Scrolls and Fallout, while scaling back the smaller game studios acquired in recent years.

Sharma, who took over as head of Xbox earlier this year, moved quickly to overhaul the business. Microsoft CEO Satya Nadella and Chief Financial Officer Amy Hood had previously weighed options for restructuring Xbox, including a full spinoff of the division. In recent weeks, however, both executives have expressed support for Sharma's plan to reform the unit.

Microsoft's gaming arm has faced mounting pressure to demonstrate stronger financial performance, and the consolidation of studios is expected to streamline operations while focusing resources on flagship franchises. The moves reflect a broader pivot within the company toward high-margin, established game properties rather than experimental projects from newly acquired teams.