Microsoft's second largest layoff leads to cancellation of three big Xbox games

In a significant restructuring move, Microsoft is set to reduce its workforce by approximately 9,000 employees, accounting for nearly 4% of its global team. This decision has notably affected the gaming sector, leading to the halt of several high-profile projects and the closure of at least one studio. Phil Spencer, the CEO of Microsoft Gaming, outlined the company's vision for future growth in an internal memo obtained by Variety. He emphasized the need to streamline operations and focus on strategic growth areas, stating, "To position Gaming for enduring success and allow us to focus on strategic growth areas, we will end or decrease work in certain areas of the business." Among the most significant outcomes of these layoffs are the cancellations of two eagerly awaited titles: Perfect Dark and Everwild. Matt Booty, head of Xbox Game Studios, confirmed in a separate email that development on both games has been halted. He also mentioned the decision to wind down several unannounced projects, highlighting that The Initiative, the studio behind Perfect Dark, will be shutting down. Perfect Dark aimed to reboot the beloved first-person shooter franchise, initially teased during an Xbox Games Showcase in 2024. Development efforts had been ongoing since The Initiative's establishment in 2018. Meanwhile, Everwild, a new intellectual property from Rare, known for Sea of Thieves, has faced a tumultuous development journey since its announcement in 2019, reportedly experiencing multiple reboots. Additionally, the layoffs have impacted Blackbird, an unannounced MMORPG from ZeniMax Online Studios, creators of Elder Scrolls Online. This project had also been in development since 2018 and was intended as a spiritual successor to ESO, although details remain scarce. Other Microsoft-affiliated studios have not escaped the wave of layoffs. Reports from Engadget revealed that around five employees from Halo developer 343 Industries were let go, while the studio continues to work on future Halo titles with a current staff of 200 to 300. Furthermore, Turn 10 Studios, known for Forza Horizon, reportedly laid off over 70 workers, and King, acquired as part of the 2023 Activision Blizzard deal, is cutting approximately 10% of its workforce, affecting around 200 employees in Stockholm. Raven Software, recognized for its work on Call of Duty titles, has also faced job losses. Despite these challenges and cancellations, Microsoft has reassured fans that all games featured during the Xbox Games Showcase in June 2025 will continue to be developed.