Xbox Ends ‘Project Fantasy’ Deal With IO Interactive — MSFT’s Gaming Unit Reconsiders Investments

• Xbox reportedly said it is shifting investments toward its “highest priorities” while keeping overall gaming spending steady.
• IO Interactive will continue developing the game but would need to seek alternative funding or self-publish it.
• The studio said it will “adapt to this new reality,” including potential short-term staffing changes.

Xbox, the gaming unit of Microsoft Corp (MSFT), has reportedly pulled out of a deal to fund and publish IO Interactive’s upcoming game Project Fantasy, as it reportedly re-evaluates its investment decisions. IO Interactive said it will continue developing the game but will now need to find other funding or self-publish the title.

The MSFT stock ended Tuesday’s session up 1.2%, while in after-hours trading it was marginally  higher, up 0.13% at the time of writing.

Xbox Reassesses Gaming Investments

Xbox said it is “taking a fresh look at where we invest so we’re focusing on our highest priorities,” according to a spokesperson statement to Bloomberg News. The company added that it is “not reducing our overall investment in games,” and expects to “invest about the same in content as we did last year,” but emphasized that “what's changing is where we're investing and the kinds of projects we're backing.”

IO Interactive Responds To Partnership End

IO Interactive said in a post on X that it has “to adapt to this new reality and its short-term consequences, including staffing decisions,” following the end of its relationship with an external partner on Project Fantasy. The studio confirmed it remains “100% committed” to the project, which was first announced in early 2023, and said it will continue development of the game and its underlying IP.

IO Interactive’s 007 First Light, released in May, has been critically acclaimed and has sold more than three million copies.

Broader Xbox Restructuring And Context

The move comes as Xbox prepares for significant job cuts in July as part of a broader “reset” under new Chief Executive Officer Asha Sharma, who took over the role in February. The exact scale of the layoffs has not yet been disclosed.

In addition to workforce reductions, Xbox is also reportedly planning to significantly reduce spending on marketing and other operational areas. The changes are seen as part of a broader push to streamline costs and refocus investments under the new leadership.

MSFT Stock: What Stocktwits Retail Says

On Stocktwits, retail sentiment around MSFT stock was ‘bearish’ at the time of writing, while message volume was ‘high.’ In the past 30 days, message volume around the stock has surged 640%, while its retail watcher base has risen 0.7% in the same period, and 1.6% in the last 90 days.

The MSFT stock has lost 23% year-to-date.

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