Microsoft confirms rumored layoffs at gaming division

Update (July 3, 2025, 08:30 CEST): Adding to the tally of losses from yesterday’s layoffs at Microsoft is the closure of first-party studio The Initiative, which goes hand-in-hand with the cancellation of its game Perfect Dark. Xbox’s Matt Booty confirmed this in a separate memo, which followed Phil Spencer’s initial email to gaming staff.

Booty wrote that “more than 40 projects” remain in active development at Microsoft’s studios.

Update (July 2, 2025, 17:14 CEST): Rare’s Everwild is not the only game that’s been axed as a result of the layoffs at Microsoft. According to Jason Schreier, a MMORPG from the makers of The Elder Scrolls Online has been canceled as well. It had been in development since 2018.

Update (July 2, 2025, 16:44 CEST): The layoffs at Microsoft may have affected Sea of Thieves developer Rare. According to VGC, the studio had to cancel Everwild, the adventure game it’s been working on since 2014. This appears to confirm rumors DBLTAP has heard earlier today and will likely result in a workforce reduction at the studio.

Original (July 2, 2025, 15:20 CEST): Rumors about incoming layoffs at Microsoft’s gaming properties have been swirling around for over a week and the bad tidings are seemingly coming true today, beginning with the divisions based in Europe. According to Bloomberg, about 10% of the staff – that’s around 200 workers – at King will be eliminated alongside support staff at ZeniMax.

King came under Microsoft’s umbrella with the acquisition of Activision Blizzard but had so far been spared any cuts thanks to the excellent financial performance of its cash cow, the mobile game Candy Crush.

Microsoft’s gaming department has already been through three rounds of layoffs following the costly acquisition, which brought Xbox’s financial performance into the focus of shareholders.

According to Bloomberg, Microsoft’s U.S. offices will be informed about the number of cuts they are expected to make later today. Variety reported that around 4% of Microsoft's total workforce will be cut, part of the total coming from the gaming division.

Find an email sent to staff by Microsoft’s gaming chief Phil Spencer below:

“Today we are sharing decisions that will impact colleagues across our organization. To position Gaming for enduring success and allow us to focus on strategic growth areas, we will end or decrease work in certain areas of the business and follow Microsoft's lead in removing layers of management to increase agility and effectiveness. Out of respect for those impacted today, the specifics of today's notifications and any organizational shifts will be shared by your team leaders in the coming days.

“I recognize that these changes come at a time when we have more players, games, and gaming hours than ever before. Our platform, hardware, and game roadmap have never looked stronger. The success we're seeing currently is based on tough decisions we've made previously. We must make choices now for continued success in future years and a key part of that strategy is the discipline to prioritize the strongest opportunities. We will protect what is thriving and concentrate effort on areas with the greatest potential, while delivering on the expectations the company has for our business. This focused approach means we can deliver exceptional games and experiences for players for generations to come.

“Prioritizing our opportunities is essential, but that does not lessen the significance of this moment. Simply put, we would not be where we are today without the time, energy, and creativity of those whose roles are impacted. These decisions are not a reflection of the talent, creativity, and dedication of the people involved. Our momentum is not accidental—it is the result of years of dedicated effort from our teams.

“HR is working directly with impacted employees to provide severance plan benefits (aligned with local laws), including pay, healthcare coverage, and job placement resources to support their transition. Employees whose roles were eliminated are encouraged to explore open positions across Microsoft Gaming, where their applications will be given priority review.

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

As this is a developing story, we’ll keep the article updated with the latest.

More news on DBLTAP: