Xbox Division Faces Deep Cuts: Halo Studios Among 9,000 Microsoft Employees Laid Off
Xbox Division Faces Deep Cuts: Halo Studios Among 9,000 Microsoft Employees Laid Off
Microsoft has initiated a sweeping round of layoffs, impacting approximately 9,000 employees globally, with a significant portion affecting its Xbox gaming division. The cuts, which began on Wednesday, July 2, 2025, have sent shockwaves through the company, including the critically acclaimed Halo Studios.
At least five employees at Halo Studios were among those terminated, as the studio grapples with “organizational shifts” outlined in an email from Microsoft Gaming CEO Phil Spencer. While an estimated 200-300 people remain at Halo Studios, the mood is reportedly tense, with one developer expressing frustration over the timing, noting Xbox’s recent record profitability.
The widespread restructuring has led to the cancellation of games like Rare’s Everwild and The Initiative’s Perfect Dark reboot, with The Initiative studio being entirely shut down. Other notable impacts include significant reductions at Turn 10 Studios (Forza Motorsport), and reported effects on Rare, ZeniMax Online Studios, King, Raven, and Sledgehammer Games. Veteran leaders like ZeniMax president Matt Firor and Rare designer Gregg Mayles are also reported to be departing.
This latest round of layoffs follows previous cuts in January and September 2024, and the closure of studios such as Arkane Austin, Alpha Dog Games, and Tango Gameworks last year. The company’s increased focus on AI, with CEO Satya Nadella stating up to 30% of code is now AI-written, raises questions about the future workforce, as some employees believe Microsoft is actively trying to replace jobs with AI agents.
A Microsoft spokesperson confirmed the layoffs affect less than four percent of the company’s global workforce, stating, “We continue to implement organizational and workforce changes that are necessary to position the company and teams for success in a dynamic marketplace.” The gaming giant reported a net revenue of $25.8 billion in the first three months of 2025, with an 8% yearly increase in Xbox content and services revenue.
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