Microsoft Announces Major Layoffs in Gaming Division, Xbox Chief Confirms

Microsoft has implemented significant layoffs across its gaming division, as detailed in a memo from Xbox chief Phil Spencer, reviewed by IGN.

A source informed IGN that King, the developer behind Candy Crush, was heavily impacted, with other segments of the gaming division also affected. IGN reports that Microsoft-owned Bethesda, including its London office, faced cuts. Additionally, Rare’s long-in-development Xbox title Everwild was canceled amid these layoffs.

These gaming division layoffs are part of a broader reduction at Microsoft, affecting 4% of its workforce, or approximately 9,100 employees, out of a global total of over 228,000.

In the memo, Spencer did not provide specifics, noting that “team leaders will share details of any organizational changes in the coming days.”

The following message from Phil Spencer was distributed to all gaming division staff today:

Today, we are announcing decisions that will affect colleagues across our organization. To ensure long-term success in Gaming and focus on high-growth opportunities, we will scale back or discontinue efforts in certain areas, aligning with Microsoft’s strategy to streamline management layers for greater agility and efficiency. Out of respect for those affected, team leaders will communicate specifics about today’s notifications and organizational changes in the coming days.

I acknowledge that these changes occur during a time of unprecedented player engagement, game releases, and gaming hours. Our platform, hardware, and game pipeline are stronger than ever. Our current success stems from tough choices made in the past. To sustain this momentum, we must prioritize high-potential opportunities. This means focusing on thriving areas, concentrating efforts where impact is greatest, and meeting the company’s expectations for our business. This approach ensures we deliver exceptional games and experiences for players for years to come.

Prioritizing opportunities is critical, but it does not diminish the weight of this moment. The contributions of those affected have been vital to our success. These decisions do not reflect the talent, creativity, or commitment of those involved. Our progress is a direct result of their years of dedication.

HR is collaborating with affected employees to provide severance benefits, including pay, healthcare coverage, and job placement support, in line with local regulations. Employees whose roles were eliminated are encouraged to apply for open positions within Microsoft Gaming, where their applications will receive priority consideration.

Thank you to everyone who has shaped our culture, products, and community. We move forward with deep gratitude and respect for all who have contributed to this journey.

Phil

Every Video Game Franchise Xbox Owns After Acquiring Activision Blizzard

Microsoft employees, speaking anonymously to protect their careers, told IGN they had been bracing for layoffs, fearing significant cuts.

Since acquiring Activision Blizzard for $69 billion, Microsoft has made substantial reductions in its gaming division. In January 2024, it laid off 1,900 employees, followed by additional cuts months later, closing studios like Arkane Austin (Redfall) and Tango Gameworks (Hi-Fi Rush). In September 2024, Microsoft eliminated another 650 gaming division jobs. In May 2025, the company cut 6,000 employees, or 3% of its total workforce. This latest round marks the fourth wave of layoffs in Microsoft’s gaming division within 18 months.

In a June 2024 interview with IGN, Xbox chief Phil Spencer stated: "I must run a sustainable business within the company and drive growth, which sometimes requires making tough decisions that I don’t enjoy, but that someone needs to make."

These cuts follow Microsoft’s announcement of plans to launch next-generation Xbox consoles and its prominent presence at the gamescom video game showcase.