Microsoft layoffs employees: 9,000 jobs cut, Xbox studios face closure

Microsoft’s gaming division is once again facing significant upheaval as the tech giant announces a new round of company-wide layoffs, impacting approximately 9,000 employees globally. This latest wave of job cuts, the fourth for Xbox in the last 18 months, sees major repercussions for Xbox Game Studios, including the cancellation of highly anticipated titles like Perfect Dark and Everwild, and the complete closure of The Initiative studio.

The news, initially rumored last week, was confirmed by Bloomberg and Windows Central, revealing that employees within Microsoft’s gaming arm were notified on Wednesday, July 2nd. This follows Microsoft’s earlier announcement this summer of a 3% reduction in its global workforce, with a further 9,000 jobs cut this week.

Deep Cuts Across Gaming Studios

The impact on the gaming division is substantial. Microsoft’s Stockholm-based King division, renowned for Candy Crush, is seeing a 10% reduction in staff, affecting around 200 roles. Other European gaming offices, including parts of ZeniMax, are also facing cuts. Reports indicate that even studios like Turn 10 (Forza Motorsport) and Raven Software (Call of Duty) have been impacted.

Phil Spencer, CEO of Microsoft Gaming, addressed the difficult situation in an internal email to all gaming employees, obtained by Windows Central. Spencer acknowledged the paradoxical timing, stating, “I recognise that these changes come at a time when we have more players, games, and gaming hours than ever before. Our platform, hardware, and game roadmap have never looked stronger.” He emphasised that these “tough decisions” are necessary for “continued success in future years” and “the discipline to prioritise the strongest opportunities.”

Matt Booty, Head of Xbox Game Studios, further elaborated on the studio-specific impacts in his own memo to staff. He confirmed the painful decisions to “stop development of Perfect Dark and Everwild as well as wind down several unannounced projects across our portfolio.” Most notably, The Initiative, the Xbox studio tasked with the Perfect Dark reboot, is being shut down entirely. Booty stressed that these choices “were not made lightly, as each project and team represent years of effort, imagination, and commitment.”

A Broader Restructuring Amidst Strong Profits

These gaming layoffs are part of a larger strategy by Microsoft to reduce management layers and increase agility, as explained by Microsoft CEO Satya Nadella. The company aims to reallocate resources towards strategic growth areas, with a particular focus on significant investments in Artificial Intelligence (AI) infrastructure. Microsoft has committed an estimated $80 billion to AI-related expenses in the last fiscal year.

Despite the widespread job cuts, Microsoft continues to report robust financial performance. The company posted nearly $26 billion in net income on $70 billion in revenue in its last quarterly report, keeping it among the most profitable companies in the S&P 500. Microsoft’s stock also closed at a record high of $497.45 per share on June 26th, though it saw a slight dip on Wednesday.

This wave of layoffs marks a concerning trend for the gaming industry as a whole, which saw an estimated 11% of game developers losing their jobs in 2024. For Microsoft, these cuts follow previous reductions in 2023, where almost 2,000 jobs were slashed from its gaming division after the $69 billion acquisition of Activision Blizzard, and the closure of several ZeniMax development teams.

Microsoft has stated it will provide severance packages, healthcare coverage, and job placement resources for impacted employees, with priority review for those applying to other open positions within Microsoft Gaming.

The gaming community now watches closely to see how these significant strategic shifts will impact Microsoft’s future in the highly competitive video game landscape.