Microsoft Cuts 9,000 Jobs, 4% of Workforce, in Gaming Division Overhaul

Microsoft has announced significant job cuts across its gaming division, including Xbox, as part of a broader effort to streamline its operations and enhance agility. The company's CEO, Phil Spencer, stated that these layoffs are in line with Microsoft's broader strategy to reduce management layers, thereby increasing efficiency and responsiveness. The cuts are part of a larger initiative by Microsoft to eliminate 9,000 jobs company-wide, which represents a 4% reduction in its workforce. This move follows previous rounds of layoffs in May and June, which collectively resulted in the loss of 6,000 positions.

The latest round of job cuts will impact various areas within the gaming division, including the closure or reduction of certain projects. Spencer emphasized that these measures are aimed at positioning the gaming division for future success. Additionally, Microsoft-owned King, the mobile game studio behind Candy Crush, will lose 200 jobs, amounting to 10% of its staff. These cuts are part of a broader effort by Microsoft to refocus on agile teams by reducing layers of management, a goal that was previously outlined by Microsoft CFO Amy Hood during the company's April quarterly earnings call.

Microsoft has repeatedly characterized its recent layoffs as part of a push to trim management layers, but the May focus on software engineering jobs has fueled worries about how the company’s own AI code-writing products could reduce the number of people needed for programming jobs. Microsoft CEO Satya Nadella said earlier this year that “maybe 20, 30% of the code” for some of Microsoft’s coding projects “are probably all written by software.”

The latest layoffs, however, seemed centered on slower-growing areas of the company’s business. The trimming of the Xbox staff follows Microsoft’s years-long expansion of the business surrounding its gaming console, culminating in 2023 with the $75.4 billion acquisition of Activision Blizzard — the maker of hit franchises like Call of Duty and Candy Crush. Before that, in a bid to compete with Sony’s PlayStation, it spent $7.5 billion to acquire ZeniMax Media, the parent company of video game publisher Bethesda Softworks.

More recently, much of Microsoft’s spending has been on the data centers, specialized computer chips and other infrastructure needed to advance its AI ambitions. The company anticipated those expenses would cost it about $80 billion in the last fiscal year. Its new fiscal year began Tuesday. The job cuts come as Microsoft continues to invest heavily in artificial intelligence and data centers. The company plans to invest $80 billion into AI-powered data centers in the 2025 fiscal year. This investment is part of a broader strategy to leverage AI in its operations, with Microsoft CEO Satya Nadella stating that as much as 30% of the company's code is now written by AI.

The latest round of layoffs is Microsoft's deepest single cut to its workforce since 2023, when it eliminated 10,000 jobs. This year alone, Microsoft has laid off 15,000 employees, highlighting the company's commitment to cost-cutting measures. The job cuts are part of a broader effort by Microsoft to balance its spending on AI and other initiatives with cost-cutting measures, including the reduction of management layers and the closure of certain projects. The company's gaming division, in particular, is under pressure to cut costs related to its $69 billion deal to buy Activision Blizzard, which closed two years ago.