Microsoft has announced its largest wave of redundancies in over two years, with around 9,000 positions set to be eliminated globally. The cuts affect approximately four percent of the company's total workforce and span several divisions.
Among the hardest hit is the Xbox gaming arm, where entire studios have been shut down and several anticipated titles cancelled. The restructuring reflects Microsoft's growing focus on artificial intelligence and operational efficiency, although it has sparked significant concern within the gaming industry.
Job Cuts Spread Across Core Divisions
The layoffs, confirmed on 2 July, span several key business areas, including Azure cloud services, HoloLens development, and enterprise sales. It marks the second major round of cuts this year, following a 6,000-person reduction in May, as well as smaller job losses in January and June. Microsoft Chief Executive Satya Nadella stated that the company is realigning resources to invest more heavily in artificial intelligence and emerging technologies. He described the cuts as part of broader efforts to streamline operations and improve focus on long-term growth sectors.
Xbox Studios Shuttered, Games Cancelled
The company's gaming division has faced particularly sharp losses. Microsoft Gaming, which includes Xbox Game Studios, is reported to have lost up to 2,000 employees. This includes teams from King, ZeniMax, Raven Software, Sledgehammer Games, Halo Studios, and Turn 10. In a statement, Xbox CEO Phil Spencer confirmed that some studios have been closed entirely, including The Initiative, which was developing the long-awaited Perfect Dark reboot.
Several games have been cancelled as a result. Alongside Perfect Dark, Rare's fantasy adventure Everwild has been shelved. ZeniMax Online's unannounced massively multiplayer online game has also been dropped. The cancellations were abrupt, with limited communication to development teams ahead of the decisions.
Industry Reaction and Xbox's Strategic Future
Phil Spencer acknowledged that the changes were part of Microsoft's broader restructuring. He said the company is 'removing layers of management to increase agility and effectiveness' and promised support for those affected, including severance pay and redeployment opportunities within Microsoft.
Industry observers say the layoffs reflect a strategic recalibration following Microsoft's recent acquisitions of Activision Blizzard and ZeniMax Media. With mounting pressure to deliver returns, Microsoft appears to be focusing its resources on high-performing franchises and services, such as Game Pass and cloud gaming. However, there are growing concerns about the long-term health of Xbox's exclusive content pipeline.
Reaction across developer forums and gaming communities has been mixed. On Reddit, one developer wrote, 'well it doesn't look like the Game Pass strategy is working as well as Microsoft hoped'. Others speculated that the company had overextended itself in the post-acquisition phase, particularly with legacy projects that failed to meet expectations.
What Comes Next for Xbox and Microsoft Gaming?
This latest round of redundancies underscores the rising cost of AI investment and the difficult balancing act between innovation and profitability. The sudden closure of studios and cancellation of anticipated games raises broader questions about Xbox's creative direction and commitment to original content.
While Microsoft insists the changes will lead to a leaner and more agile organisation, the industry is now watching closely to see how the company will maintain momentum in gaming amid internal upheaval and fierce competition.
