Microsoft Lays Off 650 More Staff in Gaming Division, Xbox Boss Phil Spencer Addresses Team in Memo

Microsoft is cutting an additional 650 jobs from its gaming division, according to a memo sent to staff by Xbox head Phil Spencer on September 12.

In the memo, Spencer stated that the layoffs mainly impact corporate and support roles, emphasizing the decision was made "to organize our business for long term success." He reassured that no games, devices, or studios would be canceled or shut down as a result of these cuts.

Phil Spencer’s email to staff is reproduced in full below:

For the past year, our goal has been to minimize disruption while welcoming new teams and enabling them to do their best work. As part of aligning our post-acquisition team structure and managing our business, 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.

I know that this is difficult news to hear. We are deeply grateful for the contributions of our colleagues who are learning they are impacted. 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.

With these changes, our corporate and supporting teams and resources are aligned for sustainable future growth, and can better support our studio teams and business units with programs and resources that can scale to meet their needs. Separately, as part of running the business, there are some impacts to other teams as they adapt to shifting priorities and manage the lifecycle and performance of games. No games, devices or experiences are being cancelled and no studios are being closed as part of these adjustments today.

Throughout our team’s history, we have had great moments, and we have had challenging ones. Today is one of the challenging days. I know that going through more changes like this is hard, but even in the most trying times, this team has been able to come together and show one another care and kindness as we work to continue delivering for our players. We appreciate your support as we navigate these changes and we thank you for your compassion and respect for each other.

Phil

This latest round of layoffs brings the total number of gaming-related job losses at Microsoft to 2,550 since its $69 billion acquisition of Activision Blizzard in 2023. Spencer noted in his message that the layoffs are tied to the integration of the acquisition.

These cuts follow 1,900 job losses earlier this year, which saw Microsoft shut down studios like Tango Gameworks, the developer of Hi-Fi Rush, and Redfall creator Arkane Austin. However, Krafton, the publisher of PUBG, saved around 50 of Tango Gameworks' 100 employees by acquiring the studio.

In a June interview with IGN, Spencer acknowledged the tough decisions he faces in managing a sustainable business: “I have to make hard decisions that frankly are not decisions I love, but decisions that somebody needs to make.”

Despite Spencer’s assertions that Xbox franchises are thriving and console engagement is high, Xbox hardware sales have dropped, and the company is now expanding several exclusives to rival platforms like PlayStation 5.

Xbox hardware sales continued to decline in Microsoft's Q4 financial results, while revenue from gaming content surged, largely driven by the Activision Blizzard acquisition. Year-on-year, gaming revenue was up 44%, bolstered by the acquisition, with Xbox’s non-Activision Blizzard business not performing as well. Content and services revenue rose 61%, with the acquisition again playing a significant role.

Microsoft’s More Personal Computing division, which includes Xbox, posted $15.9 billion in Q4 revenue, a 14% increase year-over-year.

In August, Spencer explained that Xbox’s multiplatform strategy is intended to increase revenue for Microsoft’s gaming division, especially after the acquisition of Activision Blizzard. "The bar is high for us in terms of the delivery we have to give back to the company,” he said.

Looking ahead, Microsoft is preparing to launch Call of Duty: Black Ops 6 in October, marking the first mainline Call of Duty to debut on Game Pass day-one. Rumors suggest the company is also working on an Xbox handheld device and has announced plans for next-gen Xbox consoles. Indiana Jones and the Great Circle is set for release on PC and Xbox this December, with a PS5 version to follow.