Microsoft announced layoffs affecting approximately 9,000 workers, about 4% of its 228,000-strong workforce as of June 2024. This is the company’s largest layoff in over two years and its second mass layoff in 2025. The cuts, which began Wednesday, impact multiple divisions, including the Xbox video game business, sales, and other teams globally, with 830 layoffs at its Redmond, Washington headquarters.

Xbox CEO Phil Spencer stated the layoffs aim to streamline management layers for agility and focus on strategic growth. This follows earlier 2025 layoffs: 6,000 workers in May (mostly software engineers and product managers) and 300 in Redmond last month.

The layoffs coincide with Microsoft’s $80 billion investment in AI infrastructure, including data centers and specialized chips. Analysts suggest the cuts target slower-growing areas like Xbox and legacy businesses, as Microsoft prioritizes AI, cloud, and efficiency. The layoffs follow significant gaming acquisitions, including Activision Blizzard ($75.4 billion in 2023) and ZeniMax Media ($7.5 billion). Affected game studios across North America and Europe are struggling, with employees publicly seeking new jobs.

The Microsoft layoffs also resulted in the cancellation of several projects, primarily within the Xbox gaming division. Based on available information, the following projects were explicitly canceled:

1. Perfect Dark (Reboot): A high-profile reboot of the classic IP, developed by The Initiative in collaboration with Crystal Dynamics, was canceled. The Initiative, a studio created to work on this project, was shut down as part of the layoffs. The game, announced in 2020, had faced troubled development and was described as being in “rough shape” in 2024.
2. Everwild: Developed by Rare, this fantasy title, announced in 2019 and in development for approximately 10 years, was canceled. Reports indicate Rare struggled to find a clear direction for the project, even after a reboot.
3. Project Blackbird (ZeniMax Online Studios’ MMO): An unannounced massively multiplayer online role-playing game (MMORPG) from ZeniMax Online Studios, codenamed Blackbird, was canceled.
4. Unannounced Projects: Multiple unannounced projects across Microsoft’s gaming portfolio were also terminated, though specific details about these projects were not disclosed.
5. Romero Games’ Unspecified Project: Romero Games, led by John and Brenda Romero, announced that an unspecified publisher, believed to be Microsoft, canceled funding for their new game, likely a first-person shooter, along with several other unannounced projects at other studios. The timing and context suggest Microsoft as the publisher.

Additionally, while not a cancellation, Warcraft Rumble support was scaled back, with Blizzard announcing no new content would be added, though systemic events and bug fixes would continue. Some Blizzard employees were reassigned or laid off.

Outside the gaming division, Microsoft also canceled or paused several data center projects in 2025, including:

1. Ohio Data Center Projects: A $1 billion plan for three data center campuses in Licking County, Ohio (New Albany, Heath, and Hebron), was canceled, with two sites reserved for farming.
2. Other Data Center Projects: Microsoft abandoned projects in the US and Europe with a combined capacity of about 2 gigawatts of electricity, including projects in Chicago, London, Jakarta, and Mount Pleasant, Wisconsin, due to oversupply concerns and a shift in AI strategy.
3. Microsoft Project for the Web and Roadmap Apps: These were retired in August 2025, with their functionalities integrated into the Microsoft Planner app for a unified work management experience.

These cancellations reflect Microsoft’s strategic shift to prioritize high-growth areas like AI and cloud services while trimming less promising or struggling projects, particularly in the gaming division.