Microsoft confirmed that its gaming division is undergoing significant restructuring, resulting in approximately 9,100 job cuts. This accounts for nearly 12% of the total Xbox and Microsoft Gaming workforce, making it one of the company’s largest single waves of layoffs to date.
Studios Affected: The Initiative and Rare Among Closures
The restructuring includes the complete shutdown of several internal studios. Two high-profile closures are:
- The Initiative: The California-based team working on the long-anticipated reboot of Perfect Dark.
- Rare: The historic UK developer behind Sea of Thieves, Banjo-Kazooie, and Viva Piñata.
Additionally, several smaller publishing, support, and operations teams across various regions have been disbanded. The cuts affected both creative and administrative roles.
Strategic Reasons Behind the Layoffs
According to Microsoft leadership, this decision aligns with broader corporate priorities focusing on:
- Expanding Xbox Game Pass and cloud gaming services
- Streamlining first-party content management
- Shifting more resources toward AI-driven development tools and services
Phil Spencer, head of Xbox, stated that while these layoffs are difficult, they are intended to position the company for sustainable growth over the long term.
Industry Impact and Community Reaction
These cuts come as part of a wider trend in the gaming industry during 2025, with publishers like Electronic Arts and Ubisoft also announcing staff reductions. Analysts attribute these changes to a combination of rising production costs, cooling consumer spending post-pandemic, and increasing competition from third-party platforms.
The closure of Rare in particular has generated strong reactions from the gaming community. Many players and industry veterans expressed disappointment at the end of one of Microsoft’s longest-standing development partners.
Future Outlook for Xbox
While no new project cancellations have been officially announced, it is likely that some unannounced or in-development titles have been quietly shelved. Microsoft emphasized its ongoing support for major franchises such as Halo, Forza, and Minecraft as well as its intention to expand partnerships with external studios through publishing deals.
The long-term effects of this restructuring on Xbox’s position in the console and cloud gaming markets will likely become clearer in the coming months.
