Microsoft Announces Major Gaming Layoffs, Impacting Xbox and Key Studios

Microsoft has announced another significant round of layoffs within its gaming operations, underscoring a period of continued restructuring for one of the industry's most influential companies.

This latest development comes as Microsoft intensifies its focus on strategic priorities, resulting in job losses across leading divisions such as Xbox and King, the developer behind the popular mobile game, Candy Crush. In an official company memo released to the media on June 6, 2025, Microsoft revealed that approximately 9,100 employees are being let go, with a large proportion of the layoffs concentrated in its gaming-centered businesses.

Notably, Rare, the renowned development studio celebrated for classic franchises and recent multiplayer titles, has been heavily affected; Microsoft's statement confirmed that work on the anticipated game Everwild has been discontinued as a direct result of these changes. Journalist Jason Schreier reported that the scale and abrupt nature of these layoffs have caused significant disruption for staff at impacted studios.

In one widely cited incident, employees at ZeniMax Online Studios reportedly lost access to company resources such as internal messaging tools without prior warning or communication from human resources departments.

Schreier noted that this sudden deactivation left workers uncertain about their employment status, further highlighting the challenging atmosphere currently facing many in the gaming division. This round of cuts follows a string of high-profile staff reductions and studio closures at Microsoft.

After completing the acquisition of Activision Blizzard in October 2023, Microsoft commenced sizable layoffs in January 2024, with 1,900 positions eliminated at that time.

In May 2024, the company made headlines by closing Arkane Austin and Tango Gameworks, both recognized names in the game development community.

Further cuts, including the reduction of approximately 650 jobs in September 2024 and the recent dismissal of 6,000 employees in May 2025, underscore the ongoing magnitude of Microsoft's restructuring process.

Cumulatively, estimates place the total number of jobs lost over the past 18 months at nearly 20,000—roughly 10% of Microsoft's global workforce of 228,000 employees. Phil Spencer, CEO of Microsoft Gaming, addressed staff in an internal memo stating, "We acknowledge that these changes come at a time when player engagement, game releases, and overall gaming hours are at historic highs across our platforms.

While current successes reflect challenging decisions made in the past, our future strategy demands continued discipline to direct resources to the most promising opportunities." Spencer emphasized that, despite the present difficulties, these measures are intended to ensure long-term growth and innovation in Microsoft’s gaming portfolio. The impacts of these layoffs echo throughout the industry, affecting game development timelines, platform support, and the fates of many cherished studios.

As Microsoft, Xbox, and their affiliated developers move ahead in a rapidly evolving market, the company’s focus will increasingly shift towards high-performing products and strategic investments.

The closure of projects like Everwild and further departures from celebrated studios mark a pivotal moment for Microsoft's gaming division, with industry observers and affected communities watching closely for next steps.

Rare Microsoft Xbox King Everwild ZeniMax Online Studios Candy Crush Activision Blizzard Arkane Austin Tango Gameworks Phil Spencer ZeniMax Online