Microsoft, the owner of Xbox, plans to lay off approximately 650 employees from its gaming division following its $69 billion (£54.3 billion) merger deal. The company stated that these cuts would primarily affect staff in corporate and support roles globally. Earlier this year, Microsoft had already let go of 1,900 employees in January and shut down four studios in May, which were acquired before the purchase of Call of Duty developer Activision-Blizzard.
In a memo shared online and confirmed by the media, Xbox head Phil Spencer assured employees that no games, devices, or experiences were being canceled, nor were any studios being closed as a result of the latest layoffs. The Activision-Blizzard deal, completed in October, also included the acquisition of Candy Crush maker King and followed Microsoft’s purchase of Zenimax, the parent company of Fallout creator Bethesda.
Spencer explained that the decision to reduce staff—about 3% of the gaming workforce—was made to align the team’s structure post-acquisition and set up the business for long-term success. While games and studios remain unaffected, other teams will face challenges as they adjust to new priorities and manage the lifecycle and performance of games.
Spencer acknowledged the hardship this news would cause for employees and expressed gratitude for the contributions of those impacted. The gaming industry has experienced significant layoffs over the last two years, following a surge in investments and acquisitions driven by record profits and player engagement during the pandemic. Companies like Sony, Riot Games, and Epic Games have also made large-scale cuts.
Microsoft faced criticism earlier in the year for closing well-regarded studios like Arkane Austin and Tango Gameworks. In an interview with gaming outlet IGN, Spencer highlighted the need for Xbox to operate as a “sustainable” business and demonstrate growth. He also noted during an official Xbox livestream at Gamescom that Microsoft’s gaming division holds itself to a high standard.
Despite declining Xbox hardware sales, Microsoft’s latest financial report showed an increase in gaming revenue, largely thanks to its ownership of Activision-Blizzard, which produces popular titles such as World of Warcraft, Diablo, and Overwatch. The company has also been focusing on boosting its software sales.
