Microsoft Announces Additional Layoffs in Gaming Division

Last week, reports indicated that Microsoft was preparing for a significant round of layoffs within the Xbox team. Bloomberg has reported that employees in the company's gaming division were notified of job reductions on Wednesday morning. Microsoft has recently implemented cost-cutting measures, previously announcing a reduction of 3 percent of its global workforce earlier this summer, and an additional 9,000 job cuts on Wednesday.

According to Bloomberg, Microsoft's Stockholm-based King division, known for Candy Crush, is reducing its workforce by 10 percent, which is approximately 200 jobs. Other European gaming offices are also making reductions, while US units are expected to be informed later on Wednesday.

Phil Spencer, CEO of Microsoft Gaming, sent an email to all Microsoft Gaming employees regarding the layoffs. The email was obtained by Windows Central and confirmed by Microsoft. In the message, Spencer stated:

Today we are sharing decisions that will impact colleagues across our organization. To position Gaming for enduring success and allow us to focus on strategic growth areas, we will end or decrease work in certain areas of the business and follow Microsoft’s lead in removing layers of management to increase agility and effectiveness. Out of respect for those impacted today, the specifics of today’s notifications and any organizational shifts will be shared by your team leaders in the coming days.

I recognize 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. The success we're seeing currently is based on tough decisions we've made previously. We must make choices now for continued success in future years and a key part of that strategy is the discipline to prioritize the strongest opportunities. We will protect what is thriving and concentrate effort on areas with the greatest potential, while delivering on the expectations the company has for our business. This focused approach means we can deliver exceptional games and experiences for players for generations to come. Prioritizing our opportunities is essential, but that does not lessen the significance of this moment. Simply put, we would not be where we are today without the time, energy, and creativity of those whose roles are impacted. These decisions are not a reflection of the talent, creativity, and dedication of the people involved. Our momentum is not accidental—it is the result of years of dedicated effort from our teams.

HR is working directly with impacted employees to provide severance plan benefits (aligned with local laws), including pay, healthcare coverage, and job placement resources to support their transition. Employees whose roles were eliminated are encouraged to explore open positions across Microsoft Gaming, where their applications will be given priority review. Thank you to everyone who has shaped our culture, our products, and our community. We will move forward with deep appreciation and respect for all who have contributed to this journey.

As part of the layoffs, several games, including Rare's Everwild, have been cancelled. The Initiative, the Xbox studio responsible for the Perfect Dark reboot, has been closed. The information was communicated to the team by Matt Booty, head of Xbox Game Studios, who stated that Microsoft "did not make these choices lightly, as each project and team represent years of effort, imagination, and commitment."

Matt Booty's full note to staff:

Following Phil’s note, I want to share more about the changes to the Studios business units.

We have made the decision to stop development of Perfect Dark and Everwild as well as wind down several unannounced projects across our portfolio. As part of this, we are closing one of our studios, The Initiative. These decisions, along with other changes across our teams, reflect a broader effort to adjust priorities and focus resources to set up our teams for greater success within a changing industry landscape. We did not make these choices lightly, as each project and team represent years of effort, imagination, and commitment. Our overall portfolio strategy is unchanged: build games that excite our players, continue to grow our biggest franchises, and create new stories, worlds, and characters. We have more than 40 projects in active development, continued momentum on titles shipping this fall, and a strong slate headed into 2026. For those directly affected, we are working closely with HR and studio leadership to provide support, including severance, career transition assistance, and where possible, opportunities to explore roles on other teams. To everyone across our studios: thank you. Your creativity and resilience continue to define who we are. I believe in the strength of our teams and the direction we're taking on the path ahead.

Last year, Microsoft reduced its gaming division workforce by nearly 2,000 jobs, affecting employees across Xbox and Activision Blizzard. In the same year, the company also closed three ZeniMax game development teams after acquiring the video game holding company in 2021. This marks the fourth round of workforce reductions at Xbox in the past 18 months. These layoffs follow Microsoft's $69 billion acquisition of Activision Blizzard in October 2023.

The gaming industry has experienced significant workforce reductions in recent years, with an estimated 11 percent of game developers losing their jobs in 2024. Microsoft has reported consistent profit growth, with over $25 billion in net income in its most recent quarterly report. When asked for comment, a Microsoft spokesperson stated that the company "continues to implement organizational and workforce changes that are necessary to position the company and teams for success in a dynamic marketplace."