IO Interactive, the studio behind the Hitman series and the recently released James Bond game, has announced layoffs following the collapse of a publishing deal tied to its online fantasy RPG, Project Fantasy.

The Copenhagen-based developer confirmed the cuts in a public statement addressed to the gaming community, citing the end of a partnership with an unnamed external partner as the reason for the staffing reductions. That partner has since been identified as Xbox. Microsoft confirmed to Bloomberg that it was the publishing partner in question, following documents that surfaced from the ongoing FTC v. Microsoft court proceedings.

Dear gaming community,

For a good while, it has been all positive news from IO Interactive. We remain humbled and honored by the response to our latest outing with a young, unproven Bond. A bold new story and a take on one of the most famous characters in entertainment, which…

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— IO Interactive (@IOInteractive) June 30, 2026

In a statement to Bloomberg, a Microsoft spokesperson said the company is not pulling back on game spending overall, but is shifting where that money goes and what types of projects it supports. Project Fantasy was first announced in February 2023 as an online fantasy RPG being developed by IO Interactive using their own intellectual property. The game remains in development according to the studio, which said in its message that it is “100 percent committed” to the project and that it will still be released.

The layoffs from IO Interactive come at a difficult time for Xbox more broadly. The platform holder is reportedly preparing to announce a wider round of cuts starting next week that could affect at least five studios, with some facing potential closure or being spun off. Xbox CEO Asha Sharma has previously referred to the upcoming changes as a reset aimed at building a stronger Xbox.