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Microsoft’s gaming business is seemingly in for another round of mass layoffs. The fresh cuts would be coming just as Xbox seems to be in full retreat from its long-standing console hardware business as it invests more in Windows gaming and bringing first-party exclusives to PlayStation 5.
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Bloomberg reports that another big layoff, the fourth in the tech giant’s gaming division in the last 18 months, is on its way before the end of the fiscal quarter this month. Managers are apparently expecting “substantial cuts” across Xbox, though it’s not yet clear which teams or studios might be hit hardest. This comes as Microsoft is already in the midst of laying off thousands across its sales departments.
The recent bloodletting began at Microsoft in January 2024 with nearly 2,000 layoffs across Bethesda, Xbox, and Activision Blizzard. Studio closures at Tango Gameworks, Arkane Austin, and others followed in May. Another 650 layoffs occurred in September. While Microsoft claimed that no games were canceled in that most recent round of layoffs, developers at studios like State of Decay 3 maker Undead Labs were impacted.
The ongoing cuts come at the tail end of an acquisition spree that culminated in buying Call of Duty and Candy Crush maker Activision Blizzard for $70 billion. The Xbox portfolio now constitutes the biggest gaming content publisher in the world, but at the cost of greater scrutiny and revenue expectations. Microsoft Gaming CEO Phil Spencer, who usually prefers to talk about his favorite new games, has deflected blowback for the cuts over the last year by reiterating his responsibility to keep Xbox profitable.
“Our jobs inside the company is to run a good business,” Spencer said at Summer Game Fest earlier this month right after Xbox’s big summer showcase. “We’re accountable to Microsoft for running a good business, a healthy business that continues to grow at both top line and bottom line. That’s kind of a foundation for us. And what that does is it allows us to continue to invest in Xbox for our community of players and creators and that we’re doing it. It does mean we have to make trade offs through the year on things that we’re going to invest more in, things that we’re not going to invest as much in because it is kind of we are the business that we are.”
The result has been not only bringing major first-party games like Sea of Thieves and Gears of War to PS5, but also raising prices. The Outer Worlds 2 will be the company’s first $80 game this fall, and the price of the Xbox Series X/S recently spiked due to new tariffs amid Trump’s ongoing trade war with China. It feels like only a matter of time before Game Pass Ultimate, currently $20 a month, also goes up in price again.
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