Last week, there were rumblings that Microsoft would be making another major round of layoffs throughout the company, with its gaming division, Xbox, looking to be a big focal point. Today, Microsoft made things official, laying off as much as 4%, or roughly 9,100 employees, across all departments, including gaming. Xbox confirmed the news to its employees with a memo from Phil Spencer, Head of Microsoft Gaming.

BREAKING: Mass layoffs at Xbox have started. Candy Crush maker King told employees that it is cutting 10% of staff, or 200 jobs. Bethesda’s Europe offices were hit too. U.S. offices are expected to inform people this morning. More to come shortly www.bloomberg.com/news/article…

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— Jason Schreier (@jasonschreier.bsky.social) July 2, 2025 at 5:49 AM

Phil Spencer’s email to all Microsoft Gaming employees reads:

“Today we are sharing decisions that will impact colleagues across our organization. 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. Out of respect for those impacted today, the specifics of today’s notifications and any organizational shifts will be shared by your team leaders in the coming days.

I recognize that these changes come at a time when we have more players, games, and gaming hours than ever before. Our platform, hardware, and game roadmap have never looked stronger. The success we’re seeing currently is based on tough decisions we’ve made previously. We must make choices now for continued success in future years and a key part of that strategy is the discipline to prioritize the strongest opportunities. We will protect what is thriving and concentrate effort on areas with the greatest potential, while delivering on the expectations the company has for our business. This focused approach means we can deliver exceptional games and experiences for players for generations to come.

Prioritizing our opportunities is essential, but that does not lessen the significance of this moment. Simply put, we would not be where we are today without the time, energy, and creativity of those whose roles are impacted. These decisions are not a reflection of the talent, creativity, and dedication of the people involved. Our momentum is not accidental—it is the result of years of dedicated effort from our teams.

HR is working directly with impacted employees to provide severance plan benefits (aligned with local laws), including pay, healthcare coverage, and job placement resources to support their transition. Employees whose roles were eliminated are encouraged to explore open positions across Microsoft Gaming, where their applications will be given priority review.

Thank you to everyone who has shaped our culture, our products, and our community. We will move forward with deep appreciation and respect for all who have contributed to this journey.”

BREAKING: The new MMORPG project from Zenimax Online Studios, maker of Elder Scrolls Online, has been canceled as part of the Xbox layoffs, sources tell Bloomberg News. The project, code-named Blackbird, had been in development since 2018. Still more news to come this morning.

— Jason Schreier (@jasonschreier.bsky.social) July 2, 2025 at 8:05 AM

King, the developers of Candy Crush, were hit hard, losing 10% of its staff, or about 200 jobs. Zenimax and parts of Bethesda, including its London office, were also affected. Rare, the developers behind Sea of Theives, was also affected by today’s cuts. Rare was also working on Everwild, but that game is now canceled. It’s not the only game that got canceled. An unannounced MMO in development at Zenimax Omline has been canceled as well.

The full scale of today’s Xbox layoff is not yet clear, but you can expect more news of project cancelations and job cuts as the U.S. west coast wakes up. Some studios are planning meetings within the next two hours.

— Jason Schreier (@jasonschreier.bsky.social) July 2, 2025 at 7:42 AM

US Units are expected to be told later Wednesday how many jobs would be affected at each office. This marks the fourth round of layoffs at Xbox in the last 18 months.