Xbox layoffs seem to be inspiring its partners to do the same, with a major PR agency working with Microsoft reportedly cutting staff as well. But are the layoffs related?

Assembly, a PR agency used by Microsoft, is reportedly laying off an unknown number of employees.

Jason Schreier, a video game journalist at Bloomberg, posted to Bluesky, seemingly linking the Microsoft/Xbox layoffs to redundancies at Assembly.

While Xbox layoffs won’t come into effect until the end of the fiscal year, “the company is already ending contracts and cutting vendors,” said Schrier.

The end of Microsoft’s fiscal year is June 30th, 2026, meaning that affected employees could be laid off as soon as July this year, according to Schrier’s article on Bloomberg.

The gaming giant is also planning to slash budgets for marketing and other areas, according to Schrier’s sources, who chose to remain anonymous because they are not authorized to speak to the press.

“So, Assembly, Xbox's main PR agency, is laying people off today,” Schrier said in the initial post.

The massive Xbox layoffs won't happen until after the fiscal year ends, but the company is already ending contracts and cutting vendors. So Assembly, Xbox's main PR agency, is laying people off today.

undefined Jason Schreier (@jasonschreier.bsky.social) June 29, 2026 at 10:44 PM

Assembly hasn’t officially announced the layoffs.

Are Assembly layoffs due to Xbox restructuring?

This first post implies that the restructuring at Microsoft/Xbox has resulted in layoffs at partner companies such as Assembly due to budget cuts.

The media jumped on this story quickly, with outlets reporting how the Xbox restructuring seemingly affected companies that Microsoft doesn’t even own.

However, Schrier posted a correction to his earlier statement, saying that the redundancies at Assembly are actually unrelated.

Correction: Today's Assembly layoffs were part of an agency-wide reorganization and were not related to Xbox ending contracts. People on the Xbox account were laid off but the agency is still continuing to work with Xbox, I'm told

undefined Jason Schreier (@jasonschreier.bsky.social) June 30, 2026 at 2:53 AM

The PR company, which has worked with Microsoft on its Halo Infinite brand activation campaign, is reportedly undergoing a separate restructuring from the one the new CEO, Asha Sharma, is doing at Xbox.

This isn’t a result of Microsoft cutting ties with Assembly – instead, it's “part of an agency-wide reorganization and was not related to Xbox ending contracts.”

“People on the Xbox account were laid off, but the agency is still continuing to work with Xbox,” Schrier said.

Sharma’s internal memo doesn’t mention layoffs but implies significant changes at Xbox

The new Xbox CEO has entered the role with a bang, promising to reset the company, which seems to be in a difficult spot.

Sharma has experience working for major tech companies in executive roles, including serving as Meta's vice president of product and engineering and, in 2024, returning to Microsoft as president of the CoreAI product.

Following former Xbox CEO Phil Spencer’s retirement, Sharma promised gamers and employees that her AI background wouldn’t compromise Microsoft.

Sharma has said that she will not tolerate bad AI, and while AI will influence the future of gaming, Xbox will “not chase short-term efficiency or flood (the company’s) ecosystem with soulless AI slop.”

Given the multitude of layoff announcements driven by industry-wide efforts to implement AI tools to cut costs, it’s natural to think Sharma’s decision is AI-driven, especially given her professional context.

However, an internal memo sent by Sharma doesn’t explicitly mention the layoffs, nor why these cuts are taking place.

Sharma simply said, “We won’t succeed by hiding hard truths, nor will we succeed by doing the same thing and expecting different results.”

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