Microsoft Layoffs Hit Xbox Studios Amid AI Shift

In 2025, Microsoft laid off about 9,000 employees, impacting roughly 4% of its global workforce and bringing its total yearly layoffs to over 15,000. The cuts heavily affected the Xbox gaming division, leading to studio closures such as The Initiative, cancellations of projects like Perfect Dark and Everwild, and job losses at ZeniMax Online and Turn 10. This restructuring is part of Microsoft’s $80 billion investment in artificial intelligence infrastructure, with a pivot from traditional sales roles to more technical positions focused on AI solutions. Senior leadership stated the layoffs are not a result of poor performance but reflect a strategic shift toward an AI-first business model. Microsoft management has encouraged the use of AI tools to assist affected employees during the transition. The move aligns with a broader technology sector trend of redirecting resources from established units to accelerate AI development and remain competitive.