Microsoft Gaming Division Hit by Major Layoffs, Phil Spencer Says

Microsoft has initiated a significant round of layoffs within its gaming division today, according to an internal memo from Xbox head Phil Spencer obtained by IGN.

An IGN source indicated that Candy Crush maker King was heavily impacted, though the job cuts extend across other gaming units. IGN has learned that segments of Microsoft-owned Bethesda, including its London office, were also affected. Additionally, Rare's long-gestating Xbox title Everwild was canceled amid these workforce reductions.

The gaming division layoffs form part of a broader Microsoft restructuring effort affecting 4% of its global workforce—approximately 9,100 employees out of a total exceeding 228,000.

Spencer's communication did not specify details, stating that "any organizational changes will be communicated by team leaders in the coming days."

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

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

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Microsoft employees speaking anonymously to IGN revealed that staff had anticipated these layoffs, preparing for difficult news.

Microsoft has implemented multiple workforce reductions across its gaming operations since closing its $69 billion Activision Blizzard acquisition. The company cut 1,900 positions in January 2024, followed by additional layoffs months later with the closures of Redfall developer Arkane Austin and Hi-Fi Rush creator Tango Gameworks. In September 2024, Microsoft eliminated another 650 gaming division roles. Then in May of this year, Microsoft shed a staggering 6,000 employees, representing 3% of its total workforce. Today's announcement marks the fourth major round of gaming layoffs within an 18-month period.

In a June 2024 conversation with IGN, Xbox lead Phil Spencer acknowledged: "I have to operate a sustainable business within the company and drive growth, which sometimes requires making difficult decisions—choices I personally find challenging, but that leadership must ultimately make."

These cuts follow Microsoft's recent confirmation of next-generation Xbox console development and its prominent presence at the gamescom industry event.