Microsoft is set to lay off an additional 650 employees from its gaming division, according to a memo sent by Xbox chief Phil Spencer on September 12. The layoffs, primarily affecting corporate and support roles, are part of Microsoft’s ongoing efforts to reorganize its gaming business for sustainable, long-term success. The latest job cuts bring the total number of layoffs in Microsoft’s gaming sector to 2,550 since the tech giant acquired Activision Blizzard for $69 billion in 2023.
Focus on Corporate Restructuring
In his memo, Spencer emphasized that the layoffs were made “to organize our business for long-term success” and clarified that the cuts would not result in the cancellation of any games, devices, or experiences. No studios will be closed as part of this latest round of layoffs. “For the past year, our goal has been to minimize disruption while welcoming new teams and enabling them to do their best work,” Spencer stated.
Spencer also noted that the layoffs primarily impact corporate and support functions within the gaming business as Microsoft continues to align its team structure following the Activision Blizzard acquisition. “We have made the decision to eliminate approximately 650 roles across Microsoft Gaming — mostly corporate and supporting functions — to organize our business for long-term success,” Spencer added.
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Employee Support and Transition Packages
Recognizing the challenging nature of these decisions, Spencer expressed gratitude to the affected employees and detailed the support measures in place. “In the U.S., we’re supporting them with exit packages that include severance, extended healthcare, and outplacement services to help with their transition; outside the U.S., packages will differ according to location,” Spencer wrote.
He underscored that these changes are aimed at aligning corporate resources to better support Microsoft’s gaming studios and business units, ensuring the company’s future growth remains sustainable. However, he acknowledged the difficulties faced by teams going through yet another phase of layoffs, emphasizing the importance of mutual support and respect during these challenging times.
Layoffs Linked to Activision Blizzard Acquisition
Spencer made it clear in the memo that the layoffs are directly related to the structural adjustments following the Activision Blizzard acquisition. This acquisition, which was completed in 2023, has significantly impacted Microsoft’s gaming business, both in terms of revenue and operational strategy.
Earlier this year, Microsoft laid off 1,900 employees from its gaming division, which included the closure of Hi-Fi Rush developer Tango Gameworks and Redfall developer Arkane Austin. These cuts reflect the company’s broader effort to streamline its operations and focus on high-priority areas within the gaming sector.
Financial Impact and Strategic Shifts
While Microsoft’s gaming revenue has shown significant growth year-over-year, largely due to the inclusion of Activision Blizzard, there are concerns about the performance of Microsoft’s core Xbox business. In the latest financial quarter, Xbox hardware sales continued to decline, even as gaming content sales saw a surge, driven by the integration of Activision Blizzard’s popular titles.
Overall, Microsoft’s More Personal Computing division, which includes Xbox alongside other segments like Windows, generated $15.9 billion in revenue during Q4, marking a 14% year-over-year increase. However, this growth was largely fueled by the newly acquired Activision Blizzard assets, highlighting the need for Microsoft’s gaming division to deliver consistent returns.
Pressure to Deliver
The pressure on Microsoft’s gaming business to perform is higher than ever. Spencer has been vocal about the need to make difficult decisions to ensure the sustainability and growth of the gaming division. Speaking in August, he acknowledged, “It’s definitely true inside of Microsoft the bar is high for us in terms of the delivery we have to give back to the company.”
Microsoft’s strategy includes expanding its presence across multiple platforms, including bringing Xbox games to rival consoles like PlayStation 5. Spencer stated, “Our platform continues to grow, on console, on PC, and on cloud. It’s just going to be a strategy that works for us.”
Looking Ahead: New Game Launches and Future Plans
As part of its forward strategy, Microsoft is set to launch several major titles in the coming months. Activision’s Call of Duty: Black Ops 6 is scheduled for an October release and will be the first mainline Call of Duty game available on Microsoft’s Game Pass subscription service on day one. Additionally, rumors suggest that Microsoft is preparing to release an Xbox handheld device and has announced plans for next-generation Xbox consoles.
The company also has plans to release Indiana Jones and the Great Circle on PC and Xbox this December, with a PlayStation 5 release following shortly after. These upcoming releases highlight Microsoft’s commitment to leveraging its expanded portfolio of games and platforms to drive growth in its gaming division.
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