Microsoft is reportedly preparing to lay off up to 9,000 employees, which accounts for 4% of its global workforce of 228,000. The layoffs are expected to impact Xbox's gaming division heavily. They may trigger a new wave of downsizing across the tech and gaming industries.
The main problem appears to be the stagnation of Xbox Game Pass. The service has reached 35 million subscribers. It has fallen short of Microsoft’s ambitious 100 million target by 2030. This shortfall has reportedly put pressure on leadership to cut costs and restructure.
Microsoft Gaming CEO Phil Spencer has publicly acknowledged the layoffs, noting they come at a time of record engagement. “We have more players and more games than ever before,” Spencer said, “but tough decisions are necessary to ensure Xbox continues to thrive.”
Industry insiders suggest that up to 2,000 or 20% of Xbox's workforce may be affected. Turn 10 Studios, the developer behind Forza Motorsport, is reportedly bracing for significant reductions. However, Microsoft has not officially disclosed the list of affected studios.
This is not the first major cut from Microsoft in recent times. The company laid off 6,000 workers in May 2025 and 10,000 employees in January 2023.
In 2024, Microsoft closed many famous studios resulting in mass job cuts. The list included Tango Gameworks, Arkane Austin, Roundhouse Studios, and Alpha Dog Games. These moves came just a year after Microsoft’s massive $68.7 billion acquisition of Activision Blizzard in 2023. That deal has increased expectations for Xbox to deliver results quickly.
Reports suggest that in addition to staff cuts, ongoing projects at Xbox studios could face cancellation. Although no titles have been named yet. Industry analysts expect more restructuring if performance targets aren't met.
The lack of clarity has left employees and players uneasy about the division’s creative future. Whether this round of layoffs will be the last remains to be seen.
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