Microsoft's gaming department releases thousands of employees

Microsoft Corp. began a new wave of layoffs on Wednesday morning, targeting its Xbox gaming division in the fourth major round of job cuts at the company’s gaming unit over the past 18 months. Shares of the company dropped 0.6% ahead of the day’s US market open.

According to Bloomberg, the layoffs were communicated to employees starting in Europe, including at Microsoft’s King division in Barcelona. King, best known for the popular mobile game Candy Crush, is letting go of around 10% of its workforce, approximately 200 employees. 

Additional job losses were confirmed at other European branches, including ZeniMax, the game publisher behind Elder Scrolls and Fallout. US offices were set to be informed later in the day about the scale of cuts domestically, people familiar with the matter told the publication.

“We continue to implement organizational and workforce changes that are necessary to position the company and teams for success in a dynamic marketplace,” said a Microsoft spokesperson.

Microsoft’s gaming department releases thousands of employees

Microsoft’s gaming division had around 20,000 employees as of early 2024. Since January last year, executives have proposed downsizing for the company’s attempts to increase profit margins. The most recent job losses are in addition to the 6,000 cuts announced in May 2025 and more than 300 layoffs carried out earlier this month.

The Xbox parent company had announced that it will lay off approximately 9,000 employees, impacting less than 4% of its global workforce, according to a person familiar with the matter who spoke to CNBC.

According to the Verge, reductions in January 2024 affected 1,900 jobs in the Xbox and Activision Blizzard divisions, and the closure of several studios in May 2024, including Hi-Fi Rush developer Tango Gameworks and Redfall studio Arkane Austin. 

Microsoft also laid off 650 more employees in September and around 1,000 from its HoloLens and Azure teams in June last year. 

Xbox leadership is reportedly being pressured to deliver higher margins following Microsoft’s $69 billion acquisition of Activision Blizzard in October 2023. The acquisition was one of the largest in the gaming industry’s history.

Gaming department says layoffs are part of ‘business refocusing’

In a memo to staff obtained by Variety, Xbox president Phil Spencer explained the rationale behind the cuts. 

“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,” Spencer wrote. He added that Microsoft would be following its corporate lead by “removing layers of management to increase agility and effectiveness.”

“Our platform, hardware, and game roadmap have never looked stronger,” he continued, claiming that “tough decisions” are necessary to help “stabilize” high-performing areas of the business.

The memo also mentioned that the company is providing severance benefits in line with local laws, including pay continuation, healthcare coverage, and job placement support. 

Product strategy change: Is Microsoft doing it right?

Microsoft began July by announcing the Xbox ROG Ally, a portable gaming PC developed in collaboration with Taiwanese tech firm Asus. One source noted that the company is restructuring how Xbox is distributed across Central Europe, a change that could see the end of certain operations in select regions. 

It is reportedly preparing for the next generation of Xbox consoles, but specific timelines and product details are still unconfirmed.

On June 17, Xbox president Sarah Bond unveiled a new partnership with American chipmaker AMD to co-develop next-generation console hardware. Yet, not everyone is on board with Microsoft’s evolving gaming strategy. 

Laura Fryer, a founding executive of the Xbox project, posted a 12-minute video over the weekend bashing the company’s recent direction. In it, Fryer coined Microsoft’s plan to bring Xbox titles to every device as more of a marketing stunt than a genuine plan for the betterment of gamers.

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