Microsoft lays off 9,000 employees — almost 50% in Xbox studios

On July 2, Microsoft announced the layoffs of 9,000 employees, or about 4% of the company’s total workforce. Almost half of these layoffs were in the gaming division.

The day before rumors were circulating about massive layoffs, and Xbox Game Studios, ZeniMax, Blizzard, Turn 10, Rare, and other teams have been affected. One of the most high-profile decisions was the complete closure of The Initiative studio, which was working on the Perfect Dark relaunch. The now-closed studio was created in 2018 from industry veterans, including Darrell Gallagher, known for Tomb Raider. After seven years of development, a partnership with Crystal Dynamics, and a gameplay demo at Xbox Showcase 2024, the project was shut down.

In addition, the company canceled Everwild (a new game from Rare) and ZeniMax Online’s MMO Blackbird, which has been in development since 2018 as a successor to The Elder Scrolls Online. At the same time, several unannounced projects were closed. Large-scale layoffs have also been confirmed in other teams, including:

• Turn 10 — dismissed about 50% of the team that worked on Forza Motorsport;
• Blizzard — cuts affected several divisions;
• Raven Software (Call of Duty) — confirmed a wave of layoffs;
• ZeniMax Europe — reported about layoffs in European offices.

Nearly 50% of staff at Forza Motorsport studio Turn 10 has been laid off, as per source shared via Jason Schreier.

According to total employee estimates that could be anywhere between 100-150 people. pic.twitter.com/zQAi1uQheZ

— MauroNL (@MauroNL3) July 2, 2025

Although the cutbacks hit the gaming division the hardest, Microsoft emphasized that Xbox — was not the main victim. According to their data, the gaming division lost less than half of the laid-off employees, and the rest fell to other areas. Microsoft emphasized that despite the cuts, more than 40 game projects remain in development.

At the same time, it became known about several voluntary departures. Gregg Maysles, director of Banjo Kazooie and Sea of Thieves, left Rare. The longtime director of The Elder Scrolls Online and head of ZeniMax Online Studios Matt Freer also left the company.

At the same time, the following news appeared on the Internet rumorsthat Microsoft Gaming boss Phil Spencer may resign after the launch of the next Xbox generation, and Sarah Bond will take his place. However, a Microsoft spokesperson said The Vergethat «Phil is not going to retire anytime soon».

EXCLUSIVE: Phil Spencer will be retiring from his role as CEO of Microsoft Gaming after the launch of the next generation Xbox.

Phil Spencer is working closely with Sarah Bond and her team to ensure a smooth transition for her take over as CEO of Microsoft Gaming once he… pic.twitter.com/LDqB4BW8ER

— Hope (@TheGhostOfHope) July 2, 2025

The company says it is working with affected employees, providing severance payments and offering priority in applying for new positions within Xbox Gaming. It should be noted that A month and a half ago, Microsoft laid off more than 6,000 people in favor of AI, which was the largest reduction since 2023. But now the company has exceeded the number by a third.

Source: Games Radar / Games Industry