Microsoft cuts 9,000 jobs in biggest layoffs this year, says “we continue to…”

Microsoft laid off approximately 9,000 employees Wednesday, marking the company's second major workforce reduction this year. The cuts, affecting less than 4% of Microsoft's global workforce, hit the Xbox gaming division particularly hard, with several high-profile game cancellations and studio closures announced alongside the layoffs.

The job cuts span multiple teams across geographies and tenure levels as Microsoft seeks to streamline operations and reduce management layers. The company cited "organizational changes necessary to best position the company and teams for success in a dynamic marketplace" as the primary driver for the workforce reduction.

Gaming studios face closures as game projects get scrapped
The layoffs eliminated hundreds of positions across Microsoft's gaming subsidiaries, including King (makers of Candy Crush), ZeniMax, Raven Software, Sledgehammer Games, Halo Studios, and Turn 10 Studios. Microsoft also shuttered The Initiative studio and canceled the highly anticipated Perfect Dark reboot and fantasy game Everwild after years of development.

Microsoft's Stockholm-based King division is cutting 10% of its workforce, eliminating approximately 200 positions. The Initiative, a premium Xbox studio established to develop AAA exclusives, will close entirely following the Perfect Dark cancellation . Rare Studio's Everwild, in development for several years, was also terminated alongside ZeniMax Online Studios' unannounced project.

"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," Xbox CEO Phil Spencer told employees in an internal memo. The gaming division employed about 20,000 people as of January 2024.

Microsoft’s middle management is the target in its second largest ever round of layoffs

The latest cuts represent Microsoft's fourth mass layoff in the gaming division within 18 months, following the company's $69 billion Activision Blizzard acquisition in October 2023. Microsoft previously eliminated 6,000 positions in May, targeting product and engineering roles, plus an additional 300 workers in June.

The company cited the need to "remove layers of management to increase agility and effectiveness" while redirecting resources toward artificial intelligence development. Microsoft's AI-related expenses reached approximately $80 billion in the last fiscal year as it competes in the generative AI market.

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

Affected employees will receive severance packages including pay, healthcare coverage, and job placement resources, with priority consideration for other positions within Microsoft's broader organization.