Microsoft’s gaming division, known as Xbox, has confirmed another significant round of job cuts affecting employees across various teams. This move is part of a larger wave of layoffs impacting Microsoft Corporation overall. The decision follows persistent rumors and comes amidst a turbulent period for the global video game industry. While Microsoft reports strong company-wide profits, its gaming arm continues to undergo strategic shifts and restructuring, leading to challenging workforce reductions.
This recent announcement marks the fourth major round of layoffs within the Xbox ecosystem over the past 18 months. The scale of the cuts within the gaming division specifically was not immediately detailed. However, they are tied to Microsoft’s broader plan to reduce its global workforce by approximately 9,000 positions, announced the same day. Employees across European and US-based gaming units received notifications starting Wednesday morning.
Key Impacts Across Xbox Studios and Projects
The layoffs have not spared prominent studios under the Microsoft Gaming umbrella. Reports indicate substantial impacts across several development teams acquired through previous deals like ZeniMax and Activision Blizzard King (ABK).
Specific details emerging include:
King, the Stockholm-based studio famous for Candy Crush, is reportedly reducing its staff by 10%, affecting around 200 employees.
Turn 10 Studios, developers of the Forza Motorsport series, is also heavily impacted, with one report suggesting nearly half their staff could be affected.
Layoffs are confirmed at Rare, known for Sea of Thieves and Banjo-Kazooie.
Raven Software, a key support studio for the Call of Duty franchise, also saw staff reductions.
ZeniMax Online Studios, developers of The Elder Scrolls Online, experienced layoffs.
The Xbox user research team faced significant cuts, with nearly half their members reportedly laid off.
The head of Xbox family and child safety was among those let go.
Beyond staff reductions, the layoffs have directly resulted in the cancellation of several highly anticipated game projects and the closure of a development studio. these decisions reflect a strategic adjustment of priorities.
Rare’s long-in-development original IP, Everwild, has been cancelled.
The reboot of the Perfect Dark franchise has been scrapped.
The studio primarily responsible for the Perfect Dark reboot, The Initiative, founded by Xbox in 2018, has been shut down entirely.
An unannounced MMORPG project at ZeniMax Online Studios, codenamed “Blackbird,” which had been in development since 2018, was also cancelled.
Support for Blizzard’s mobile title Warcraft Rumble is reportedly ending, with affected developers potentially transitioning or being laid off.
These project cancellations and studio closures underscore a focused effort to consolidate resources. While difficult for the teams involved, leadership frames them as necessary strategic realignments.
Leadership Addresses the Workforce Changes
Phil Spencer, CEO of Microsoft Gaming, communicated the news to employees via email. He acknowledged the difficult timing of these changes. Spencer highlighted that the cuts occur “at a time when we have more players, games, and gaming hours than ever before.” He also asserted that the company’s “platform, hardware, and game roadmap have never looked stronger.”
Despite this positive outlook on performance and future plans, Spencer explained the necessity of making tough decisions for “continued success in future years.” A core part of this strategy, he stated, is “the discipline to prioritize the strongest opportunities.” This means ending or decreasing work in certain areas and focusing efforts where they have the greatest potential.
Matt Booty, Head of Xbox Game Studios, also addressed staff, specifically detailing the impacts on development teams. He confirmed the closure of The Initiative and the cancellations of Perfect Dark and Everwild. Booty indicated that “several unannounced projects across the portfolio” are also being wound down.
Booty emphasized that these choices were not made lightly. He recognized that each project and team represented “years of effort, imagination, and commitment.” He explained that the decisions “reflect a broader effort to adjust priorities and focus resources.” This is intended to better position teams within a “changing industry landscape.” Both Spencer and Booty stressed that the layoffs are not a reflection of the talent or dedication of the impacted employees. They stated that HR is providing support including severance packages, healthcare coverage, and job placement assistance.
Context: Industry Trends and Microsoft’s Strategy
These workforce reductions at Xbox do not happen in a vacuum. The broader video game industry has faced a challenging couple of years. An estimated 11% of game developers globally lost their jobs in 2024 alone. High development costs, market saturation, and shifting consumer habits are often cited as contributing factors across the industry.
For Microsoft, the layoffs are set against the backdrop of massive recent acquisitions. The company finalized its $69 billion acquisition of Activision Blizzard in October 2023. This followed the earlier purchase of ZeniMax Media (Bethesda) in 2021. These acquisitions dramatically expanded Microsoft’s gaming portfolio and workforce. Integrating these vast organizations inevitably leads to restructuring and overlap.
Microsoft’s overall financial performance remains robust. The company reported over $25 billion in net income in its most recent quarterly report. Annual revenue in 2024 exceeded $245 billion, a significant increase from the previous year. This contrast between strong company profits and widespread layoffs, both within gaming and across Microsoft, has drawn scrutiny.
Furthermore, Xbox is navigating significant strategic shifts. The brand is increasingly adopting a multiplatform approach, bringing more first-party titles to rival consoles like PlayStation. They are also exploring platform-agnostic hardware concepts. These strategic pivots require reallocation of resources and personnel to align with new priorities. The focus on “strategic growth areas” and prioritizing “strongest opportunities” mentioned by leadership likely relates to these evolving plans, including the integration of ABK and ZeniMax IP into future roadmaps.
Despite the cancellations and studio closure, Matt Booty stated that Xbox still has “more than 40 projects in active development.” He also noted “continued momentum on titles shipping this fall, and a strong slate headed into 2026.” Reports suggest projects specifically highlighted during the recent Xbox Summer Showcase are considered safe. However, the impact of layoffs on the teams working on those safe projects remains a concern as details continue to emerge. This wave of layoffs underscores the ongoing volatility and strategic recalibrations occurring within one of gaming’s largest publishers.
Frequently Asked Questions
What specific games were cancelled during the recent Xbox layoffs?
The recent workforce reductions at Microsoft Gaming led to the cancellation of several in-development titles. These include Rare’s long-anticipated original game Everwild. The Perfect Dark reboot project was also cancelled as its primary development studio, The Initiative, was closed down entirely. Additionally, an unannounced MMORPG from ZeniMax Online Studios, codenamed “Blackbird,” was reportedly scrapped. Support for the mobile game Warcraft Rumble is also expected to end.
Why is Microsoft laying off employees in its gaming division despite profits?
Microsoft states the layoffs are “necessary to position the company and teams for success in a dynamic marketplace.” While the company is highly profitable overall, the gaming division is undergoing strategic restructuring. This includes integrating massive acquisitions like Activision Blizzard and ZeniMax, adjusting to a changing industry landscape, and reallocating resources to prioritize specific growth areas and opportunities. Leadership indicated the decisions, though difficult, are vital for future success, even as current player engagement is high.
How do these Xbox layoffs compare to past job cuts at Microsoft Gaming?
This marks the fourth significant round of layoffs within Microsoft’s gaming division in the past 18 months. Previous cuts included approximately 10,000 company-wide reductions impacting gaming teams in early 2023, about 1,900 staff across ABK, Bethesda, and Xbox in January 2024, and other smaller reductions. This pattern indicates ongoing strategic adjustments and cost-cutting efforts within the gaming sector, even following major expansions through acquisitions.
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