Microsoft lays off 9,000 employees, cancels major games amid AI restructuring

More jobs go after 6,000 culled in May

Microsoft has confirmed a new round of layoffs affecting up to 9,000 employees, roughly 4% of its global workforce, as the tech giant restructures its gaming division and scales back projects across several key business areas.

As reported by Bloomberg, the layoffs strike particularly hard in Microsoft Gaming, the division overseeing Xbox, where widespread cuts have led to the cancellation of several long-running game projects and the closure of development studios.

"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," Xbox chief Phil Spencer addressed the team in a message.

The layoffs include more than 70 staff members at Turn 10 Studios, the developer of Forza Motorsport.

In addition, The Initiative, a Santa Monica-based studio created to lead the Perfect Dark revival, is being closed entirely.

ZeniMax Online Studios, known for The Elder Scrolls Online, is also impacted, with an original online game now cancelled and associated staff let go.

European offices, including ZeniMax's regional branches, began layoffs early Wednesday. The King division, known for the mobile hit Candy Crush and acquired through Microsoft's $69 billion Activision Blizzard deal, is also reducing its workforce by about 10%, cutting approximately 200 jobs.

In an internal message to staff, Xbox Game Studios head Matt Booty wrote that the studio closures and project cancellations "reflect a broader effort to adjust priorities and focus resources to set up our teams for greater success within a changing industry landscape."

This latest round of layoffs follows a turbulent year for Microsoft employees. In January 2024, Microsoft laid off 1,900 employees from Activision Blizzard and Xbox.

May 2024 brought additional game studio closures, while in June, 1,000 workers from the HoloLens and Azure cloud teams were made redundant.

Another 650 Xbox employees were dismissed in September 2024 as part of post-acquisition restructuring.

In total, Microsoft has conducted multiple waves of redundancies over the past 18 months, with roles in software engineering, product management, and programme management frequently targeted.

In May 2025, Microsoft announced the elimination of 6,000 jobs, with product and engineering roles bearing the brunt of the cuts.

While the company had more than 228,000 employees worldwide as of June 2024, that number has steadily declined due to continued rounds of cuts in pursuit of what executives describe as long-term operational efficiency.

Though some affected roles are being reshaped due to AI-driven efficiencies, Microsoft insists the layoffs are not about replacing workers with AI.

Instead, the company is attempting to control costs as it pours money into the infrastructure needed to support its AI ambitions.

During its earnings call on 30th April, chief financial officer Amy Hood hinted at upcoming restructuring, citing a focus on "building high-performing teams and increasing our agility by reducing layers" of management.

Microsoft spent more than $80 billion on infrastructure during its 2025 fiscal year, up from $55 billion the year before, much of it dedicated to meeting growing AI demands.