Microsoft Makes Major Cuts Across Gaming Division, Phil Spencer Confirms

Redmond, July 5, 2025 – Microsoft has launched its third major round of layoffs this year, prominently affecting its gaming arm, Microsoft Gaming—formerly known as the Xbox division. The company will be eliminating around 9,000 positions, equating to approximately 4 % of its 228,000-strong global workforce

🔴 Heavy Impact on Xbox Studios and Teams

Xbox CEO Phil Spencer sent an internal memo to staff confirming that “a number of the cuts” come from within his division, though exact numbers per studio haven’t been disclosed inc.com. Industry reporting indicates significant layoffs at several studios:

• King (Candy Crush maker): ~10 % of staff (~200 people)
• Turn 10, developer of Forza Motorsport: about 50 % cuts
• ZeniMax Media: layoffs in marketing teams across London and Maryland

In addition, Microsoft has cancelled multiple high-profile projects including Perfect Dark, Everwild, and new IPs from ZeniMax and Rare’s Everwild, with studios like The Initiative reportedly closing down.

🎯 Spencer’s Message: Focusing on Strategic Growth

In his memo, Spencer outlined that these moves are aimed at “positioning Gaming for enduring success,” focusing efforts on areas with the greatest strategic value. He emphasized simplifying operations by removing management layers and de-prioritizing less viable projects theverge.com.

Alignment of this restructuring with Microsoft’s broader pivot toward artificial‑intelligence initiatives and cost optimization was also noted, as the company faces mounting pressure to improve profitability and organizational agility .

📉 Context: A Year of Turbulence

This third sweep follows an earlier round in May that eliminated over 6,000 roles, and additional cuts affecting sales and marketing teams. Since 2022, Microsoft Gaming has endured numerous layoffs and closures, including shuttering Bethesda and Arcane studios, as well as trimming Blizzard and Activision support teams.

🧩 Industry-Wide Pressure and Future Outlook

Microsoft is not alone. The broader video game industry has lost around 35,000 jobs since early 2022 amid rising development costs, shifting consumer trends, and intensified consolidation.

Spencer reiterated that Microsoft’s long‑term plan centers on growing the reach and quality of its first-party offerings—both on Xbox Game Pass and across multiple platforms—while streamlining operations to better invest in content and cloud gaming infrastructure.

📝 What This Means for Staff & Fans

• Affected employees will receive severance, healthcare, and job transition assistance; they’re encouraged to apply elsewhere in Microsoft Gaming for priority consideration.
• Fans can expect a more focused release schedule, with “redirections” toward high‑impact franchises and cloud service enhancements.
• Projects facing cancellation do signal creative loss—but the reshaping could enable stronger, more concentrated offerings in the future.

Microsoft’s gaming strategy is entering a pivotal phase—trimming legacy projects and studios while realigning talent toward scaled investments and AI-driven growth. Phil Spencer’s internal chief directive is clear: build for long-term sustainability, but not without significant short-term consequences.

Let me know if you’d like deeper insights into how this might impact Game Pass, upcoming releases, or rival console strategies.