Microsoft has begun the process of widespread layoffs across the company, including Xbox, with less than 4% of Microsoft’s global workforce being affected. Reports suggest roughly 9,100 employees have been affected.
A Microsoft spokesperson said, “We continue to implement organizational and workforce changes that are necessary to position the company and teams for success in a dynamic marketplace.”
As a result of the layoffs, Xbox has canceled The Initiative’s Perfect Dark, and Rare’s Everwild, and ZeniMax Online Studios’ unannounced MMORPG codenamed “Blackbird,” according to Bloomberg, Windows Central (2), and VGC.
In regards to Everwild, the game has been in development in some form for more than 10 years. However, the developers struggled to formulate a clear direction for the game, even after a reboot.
Moreover, Xbox has shut down The Initiative, effective immediately. Activision subsidiary and Candy Crush developer King is also facing layoffs of 10% of its staff, or roughly 200 jobs. 50% of Turn 10 Studios, the developers of Forza, were also laid off.
Two emails from Microsoft Gaming CEO and head of Xbox Phil Spencer and Xbox Game Studios lead Matt Booty regarding the layoffs were also acquired. The emails can be read in full below.
From Phil Spencer
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
From Matt Booty
Following Phil’s note, I want to share more about the changes to the Studios business units.
We have made the decision to stop development of Perfect Dark and Everwild as well as wind down several unannounced projects across our portfolio. As part of this, we are closing one of our studios, The Initiative. These decisions, along with other changes across our teams, reflect a broader effort to adjust priorities and focus resources to set up our teams for greater success within a changing industry landscape. We did not make these choices lightly, as each project and team represent years of effort, imagination, and commitment.
Our overall portfolio strategy is unchanged: build games that excite our players, continue to grow our biggest franchises, and create new stories, worlds, and characters. We have more than 40 projects in active development, continued momentum on titles shipping this fall, and a strong slate headed into 2026.
For those directly affected, we are working closely with HR and studio leadership to provide support, including severance, career transition assistance, and where possible, opportunities to explore roles on other teams.
To everyone across our studios: thank you. Your creativity and resilience continue to define who we are. I believe in the strength of our teams and the direction we’re taking on the path ahead.
— Matt Booty, Xbox Game Studios
