Phil Spencer Microsoft Gaming
Microsoft has confirmed another significant wave of layoffs, affecting approximately 9,100 employees, which accounts for roughly 4 percent of its global workforce. This time, the gaming division is taking the largest hit. This is the latest in a string of workforce reductions at the company, many of which have hit its gaming operations particularly hard over the past year.
While the broader layoffs span multiple business units, reports from The Seattle Times and Bloomberg indicate that Microsoft Gaming which includes Xbox, ZeniMax, and Activision Blizzard, is taking some of the heaviest blows. Among the casualties are over 70 roles at Turn 10 Studios, the team behind Forza Motorsport, and the apparent cancellation of two long-in-development titles: Perfect Dark and Everwild. The Initiative, the studio helming Perfect Dark, is being shut down entirely as part of this restructuring. Microsoft-owned King, the mobile games studio behind Candy Crush, is also reportedly laying off 200 employees, about 10 percent of its staff.
In a memo to employees, Xbox head Phil Spencer acknowledged the depth of the cuts, framing them as a necessary step to secure the division’s long-term future. “To position Gaming for enduring success and allow us to focus on strategic growth areas,” Spencer wrote, “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.”
Spencer also took time to acknowledge the difficult timing of the move. “I recognize that these changes come at a time when we have more players, games, and gaming hours than ever before… Prioritizing our opportunities is essential, but that does not lessen the significance of this moment.” Here’s the full memo sent by Spencer to all employees:
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.
Phil
The latest round comes on the heels of several painful quarters for Microsoft employees. In January 2024, 1,900 roles across Xbox and Activision Blizzard were eliminated. That was followed by a series of studio closures in May, and another 1,000 layoffs in June that impacted Microsoft’s HoloLens and Azure teams. In September, the company quietly laid off 650 more Xbox employees in what was then described as a post-acquisition restructuring related to its $68.7 billion purchase of Activision Blizzard.
Taken together, Microsoft has now cut more than 19,000 roles in the last 18 months which is a staggering number for a company that continues to post healthy profits and whose gaming division remains one of its most prominent consumer-facing pillars.
Microsoft’s official line has consistently pointed to a strategic realignment rather than financial distress. With the company now looking to consolidate efforts around “the strongest opportunities,” it’s clear that the goal is to streamline operations and double down on what’s working, whether that’s Game Pass, the Xbox Series X|S ecosystem, or select first-party franchises.
The cuts also raise questions about the long-term viability of Microsoft’s strategy of acquiring studios en masse. With the closure of The Initiative and the shelving of anticipated titles like Perfect Dark, critics are likely to point to a broader misalignment between acquisition-driven expansion and the internal support needed to bring such projects to life.
Despite the upheaval, Microsoft’s gaming division still boasts a strong release pipeline, at least on paper. Upcoming titles like Fable, Gears of War: Reloaded, Ninja Gaiden 4, The Outer Worlds 2, and Call of Duty: Black Ops 7 are still slated for release in 2025 and 2026, and the company continues to promote its leadership in subscription gaming and cloud streaming through Xbox Game Pass and Xbox Cloud Gaming.
For now, though, the message is clear: Microsoft is entering a leaner, more selective phase in its gaming ambitions. It remains to be seen whether that focus will deliver the kind of sustainable success Spencer and his leadership team are aiming for or whether these continued layoffs signal deeper structural issues yet to be addressed.
Microsoft says it is offering severance, healthcare continuation, and outplacement support to all impacted staff, in line with local regulations. Spencer’s memo also noted that affected employees would receive priority consideration for other roles across Microsoft Gaming. “Thank you to everyone who has shaped our culture, our products, and our community,” Spencer concluded. “We will move forward with deep appreciation and respect for all who have contributed to this journey.” For Microsoft Gaming, the journey continues but it’s now unmistakably on a narrower path.
