Phil Spencer, CEO of Microsoft Gaming, has sent an internal memo to staff announcing significant layoffs throughout the Xbox and Microsoft Gaming divisions. The memo describes an upcoming restructuring aimed at focusing on strategic growth areas and improving operational efficiency, even as the company reports record engagement and strong product pipelines.
“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,” Spencer stated in the memo.
The announcement comes despite Spencer highlighting the company’s current success, including record numbers in player engagement, game releases, and overall gaming hours. This creates a puzzling situation where employees are being let go during what appears to be a successful period for Xbox.
Affected employees will receive severance packages, healthcare benefits, and job placement support. Spencer also noted that impacted staff would receive priority consideration when applying for other open positions within Microsoft Gaming.
These cuts follow multiple rounds of layoffs at Microsoft over the past several years. Just months ago, Microsoft reportedly cut approximately 10% of its workforce across all divisions. The gaming sector has been particularly affected following Microsoft’s massive $70 billion acquisition of Activision Blizzard in 2023.
Spencer has led Xbox since 2014 and was promoted to CEO of Microsoft Gaming in 2022. Under his leadership, Xbox has shifted focus toward digital services like Xbox Game Pass and made major studio acquisitions. However, the division has faced scrutiny regarding its competitive performance compared to PlayStation and Nintendo.
The memo emphasized that these decisions “do not lessen the significance of this moment” and that the layoffs “aren’t a reflection of the talent, creativity, and dedication” of impacted employees. Spencer concluded by expressing gratitude for employees’ contributions and promising to move forward with “deep appreciation and respect.”
Corporate speak vs. reality
The conflicting messages of praising employees’ achievements while laying them off hasn’t gone unnoticed. The gaming industry as a whole has witnessed widespread layoffs since 2022, linked to economic pressures, post-pandemic shifts, and company consolidations.
Microsoft’s restructuring is part of a bigger trend in tech, with companies going for leaner teams and focusing on projects that promise bigger returns. All this is happening while Xbox is gearing up for big releases and seeing record user engagement—which leaves people scratching their heads about the timing and reasoning behind these job cuts.
