Polyarc and Eidos-Montréal Hit by Major Layoffs as Industry Crisis Persists

SEATTLE & MONTREAL — The gaming industry's prolonged period of instability claimed two more major victims this week. Polyarc, the Seattle-based studio behind the acclaimed Moss VR series, and Eidos-Montréal, the developer of Deus Ex and Marvel's Guardians of the Galaxy, both announced significant workforce reductions on Monday, March 30, 2026.

These cuts follow a brutal first quarter for the sector, which has seen thousands of jobs lost across both VR-specific and traditional AAA development studios. The announcements come just weeks after Meta's own Reality Labs cuts and add to a growing wave of restructuring across the industry that began in late 2024.

Polyarc | VR Project Collapse Triggers 66% Staff Cut

For Polyarc, the layoffs are a direct result of a failed funding round. According to LinkedIn updates from former employees, including DevOps Director Alex Holodak, the studio was forced to let go of approximately 35 of its 52 employees, or roughly two-thirds of its entire workforce.

The root cause: a major project in development since late 2024 lost its primary funding in December 2025. Despite a "hail mary" attempt to secure a third-party publisher or alternative investors over the following three months, those efforts were ultimately unsuccessful.

VR Market Context | Meta's Funding Withdrawal

Industry analysts point to a structural shift in the VR funding landscape as Meta has pivoted its hardware priorities away from aggressive first-party studio support, placing independent VR developers in a precarious position. Polyarc joins a growing 2026 list of VR casualties that includes nDreams and Mighty Coconut, both of which made significant cuts earlier in the year.

While the studio remains open with a skeleton crew, the future of the Moss franchise remains uncertain. The remaining team is currently circulating a talent spreadsheet to help their departed colleagues find new roles in an already-difficult job market.

Eidos-Montréal | 124 Cut as Studio Head Departs After 19 Years

In a separate but equally heavy blow, Eidos-Montréal confirmed it is laying off 124 employees across its production and support teams. This marks the third time the studio has downsized since being acquired by Embracer Group in 2022.

Detail	Status
Total Jobs Lost	124 (Production & Support)
Leadership Change	David Anfossi stepping down as Studio Head after 19 years
Current Projects	Support role on Xbox's Fable reboot and Grounded 2
Strategic Shift	Pivoting away from original single-player IP development

The departure of David Anfossi, who joined in 2007 and oversaw the resurgence of the Deus Ex franchise, signals an end of an era for the Montreal-based developer. Anfossi spent 19 years building the studio into one of the most respected in North America before the Embracer acquisition fundamentally changed its direction.

From Lead Developer to Support Pillar

Reports suggest that while the studio was once working on a new Deus Ex entry and an unannounced "AAAA" title, both projects were quietly scrapped or paused during Embracer's ongoing restructuring. Eidos-Montréal now operates primarily as a support studio for Xbox Game Studios projects, including the Fable reboot and Grounded 2.

The shift from an IP-originating studio to a support function represents a dramatic repositioning. It is the kind of strategic pivot that, historically, precedes either a studio sale or further consolidation.

The Wider Pattern | Q1 2026 Casualty Count

These two announcements are part of a broader pattern that has defined the first quarter of 2026 in gaming. February alone saw EA, Sony, Riot, and Ubisoft all make significant cuts. The industry is struggling with several converging pressures:

• VR market contraction — Meta's pullback from first-party VR funding has left independent developers without their primary institutional backer
• Embracer Group fallout — The Swedish conglomerate's aggressive 2022-2023 acquisition spree, followed by a failed $2 billion deal with Saudi Arabia's Savvy Games Group, triggered a wave of studio closures and cuts that continues to ripple through the industry
• AAA cost inflation — Blockbuster game budgets have ballooned past $200-300 million, making single-title bets too risky for mid-size publishers
• Live service fatigue — Multiple high-profile live service launches have failed, forcing studios to abandon expensive long-term content commitments

What Comes Next

For Polyarc, the immediate question is whether a publisher acqui-hire or IP sale can preserve the Moss franchise. VR titles with a proven user base and critical reputation are rare assets, and Meta's Quest platform has historically been willing to license or acquire established VR IP.

For Eidos-Montréal, the future depends entirely on whether Embracer Group, which continues its own restructuring, sees value in retaining the studio as a support studio or seeks a buyer. Given the studio's established relationships with Xbox Game Studios on Fable and Grounded 2, a Microsoft acquisition or long-term contract arrangement is one plausible outcome.

Neither story is over. But both arrive as stark reminders that in 2026, no studio size, franchise pedigree, or platform relationship provides guaranteed stability in the gaming industry.