Microsoft is preparing another substantial round of layoffs across its Xbox gaming division, according to a report from Bloomberg. This marks the fourth major wave of job cuts at Xbox in just 18 months, creating uncertainty for thousands of employees across the company’s gaming ecosystem.
The latest cuts will impact multiple departments within Xbox, affecting both core teams and various game studios that joined Microsoft through recent acquisitions. While exact numbers haven’t been disclosed, the scale appears significant and spans hardware, software, and recently acquired studios.
These layoffs follow Microsoft’s massive $69bn acquisition of Activision Blizzard in 2023, which dramatically expanded the company’s gaming footprint. Since that deal closed, Microsoft has been actively working to streamline operations and eliminate what executives view as redundancies across newly integrated teams.
Previous rounds of cuts primarily targeted sales and management positions, with Microsoft stating goals of reducing “organizational layers” and implementing “sales execution changes.” The current round appears broader in scope and aims to boost Xbox’s profit margins in the face of increasing pressure from Microsoft leadership.
The gaming division’s financial performance has come under heightened scrutiny despite Microsoft’s aggressive acquisition strategy that brought popular franchises like Call of Duty, Warcraft, Diablo, Elder Scrolls, and Fallout under its umbrella. While Xbox Game Pass subscriptions continue to grow, hardware sales have struggled compared to competitors Sony and Nintendo.
Microsoft has already closed several studios in recent months, including Tango Gameworks (creator of Hi-Fi Rush) and Arkane Austin (developer of Redfall). These closures raised concerns about Microsoft’s long-term commitment to creative development despite its massive content acquisitions.
The Xbox layoffs reflect broader industry trends, as many gaming companies have reduced workforces following pandemic-era expansions. Companies like Sony, Electronic Arts, and Embracer Group have all announced significant cuts in the past year as the industry faces economic headwinds and shifts investments toward AI and other technologies.
Game over for job security
Employees who survive this round of cuts reportedly fear additional layoffs may follow, creating an atmosphere of anxiety throughout the division. For many developers, the constant threat of job loss raises questions about career stability in an industry that has become increasingly volatile.
Microsoft continues to publicly affirm its commitment to gaming, positioning Xbox Game Pass as the centerpiece of its strategy while gradually expanding its presence on multiple platforms. However, these repeated workforce reductions have sparked debate about the company’s true priorities as it balances gaming ambitions against pressure for higher profits.
