In one of the most significant recent mass layoffs in tech and gaming, Microsoft terminated contracts with as many as 9,000 employees worldwide last week, with Xbox Game Studios heavily affected.
This is the tech giant’s fourth round of layoffs since the year began, which comes amidst an investment of $80 billion USD in AI infrastructure for the company — and Microsoft CCO Judson Althoff reporting $500 million USD in savings thanks to AI tools, as reported by Bloomberg. Impacts have been felt across the gaming division, with numerous senior developers in Xbox-owned studios fired and highly anticipated titles cancelled.
The human cost is significant, but one that Xbox boss Phil Spencer claimed was key to the company’s “enduring success” in a message to staff. Regarding affected projects, the dust is still clearing on the full impact. Still, several titles have been confirmed to have fallen by the wayside, with numerous veteran developers taking to social media to protest the decisions.
Just a giant black hole sucking everything in, and spitting out bones. While I'm excited for more games, it's important to remember that behind all the PR and hype is the simple truth that they bought portfolios, not people. When you're bought, they're not buying *you*.… https://t.co/toNkZtK3ax
— Very AFK (@Cromwelp) July 2, 2025
Chief among the cancellations is Rare’s “Everwild,” which led to the departure of veteran director Gregg Mayles and executive producer Louise O’Connor, and the reboot of “Perfect Dark” has also ceased production with the closure of first-party developer The Initiative.
Other studios reportedly affected include ZeniMax Media, which has cancelled an unannounced MMO title and said goodbye to its director, Irish studio Romero had funding for its next title pulled, “Candy Crush” developer King supposedly lost 200 staff members and “Forza Motorsport” developer Turn 10 was reportedly subjected to layoffs of 50% of its employees.
Other impacts include Blizzard’s mobile game “Warcraft Rumble,” which lost its entire developer team, and concerns are mounting for the upcoming “Contraband” from Avalanche Studios, which has had its announcement trailer pulled from the Xbox YouTube account.
This doesn’t mean that Xbox is altogether scrapping its upcoming portfolio. Sources have confirmed that every title showcased in June for the Xbox Games Showcase is still in development, with at least 40 active projects underway, according to internal communications within Xbox Game Studios obtained by Variety.
Many were quick to draw a connection between the cutting of human costs and Microsoft’s increasing investment in AI tools and partnerships. Former Square Enix business director Jacob Navok said Microsoft “must either get on board, or perish” when it comes to generative AI tools in gaming.
This is a long thread about Square Enix, the Microsoft layoffs, AI, and Metcalfe's law.
— Jacob Navok (@JNavok) July 8, 2025
Additionally, Xbox Game Studios Executive Producer Matt Turnbull took to LinkedIn with a now-deleted post to share advice on how former staff could find new employment with the help of AI tools such as ChatGPT.