Earlier, we reported exclusively that Perfect Dark was on the chopping block as part of Microsoft's latest round of cuts. Now, we can confirm the sad news.
Today, Microsoft revealed broad layoffs hitting 4% of its global workforce, across every division at the company. Many of those layoffs are hitting Xbox, with staffers in various departments receiving notice today. Many of those affected include Xbox studio The Initiative, which is sadly being closed down.
Perfect Dark was set to be a revival of Rare's classic stealth IP from the early 2000s. The team at The Initiative was set up in 2018 with studio heavyweights including leader Darrell Gallagher, of Tomb Raider fame. Gallagher's former team at Crystal Dynamics was working together with Microsoft on Perfect Dark, and that partnership will now also conclude.
Microsoft is shutting down The Initiative as a result of the game's cancellation. Microsoft says it will work with staffers to provide severance and support, and has encouraged developers affected to apply for other Xbox positions within the company — to receive priority consideration.
Xbox Games Studio head Matt Booty shared the following email internally, confirming that Rare IP Everwild, Perfect Dark, and other "unannounced projects" have been cancelled. Windows Central understands that one of these projects was ZeniMax Online's new MMORPG Blackbird, previously meant to succeed The Elder Scrolls Online.
The Initiative is the only studio closure planned today, although some other teams have seen cuts of varying degrees.
"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." — Matt Booty, Xbox Game Studios
Everything shown in the recent Xbox Showcase from June is "safe" according to our sources, including upcoming Xbox games like Clockwork Revolution, and other previously announced games like State of Decay 3. We've seen positions in QA get hit in Activision and Blizzard teams, as well as marketing and sales, and Undead Labs has reportedly received a round of layoffs as well despite the fact the upcoming zombie apocalypse simulator's development remains ongoing. Turn 10 has also seen a wide array of layoffs, after Forza Motorsport received mixed reviews from sim racing fans. Microsoft has made cuts in its gaming managerial and producer layers, with staff roles in production and game management being reduced.
Microsoft's big layoff round has hit 9,000 staffers in various divisions, from Azure to Xbox, although information shared with us suggests that Xbox's next-gen console hardware plans remain unaffected.
It's another tough time for all those affected, and another bruise on Microsoft's record — although other big tech and gaming firms have laid off thousands this year as well, as technologies like AI continue to eat into the human work force. Despite reporting record profits, Microsoft has laid off over 15,000 people in 2025.
