Xbox projects cancelled amid Microsoft layoffs

Microsoft has confirmed plans to cut up to 9,000 jobs—roughly 4% of its global workforce—in its latest round of redundancies this year. The company cited the need to adapt to a rapidly evolving market, while pressing ahead with major investments in artificial intelligence.

Although Microsoft did not specify which divisions will be affected, reports suggest its Xbox gaming unit will face significant cuts. According to internal emails, the reboot of Perfect Dark and the game Everwild have been cancelled, and The Initiative, the studio behind Perfect Dark, will shut down.

Additional layoffs are impacting other gaming studios, including Turn 10 and ZeniMax Online Studios. ZeniMax’s long-time director Matt Firor has announced his departure. Meanwhile, Ireland’s Romero Games has also been affected after funding for its project was pulled by a publisher.

The upcoming job cuts will mark Microsoft’s fourth round of layoffs in 2025. Over 800 affected roles are based in Washington state, including in Redmond and Bellevue, key Microsoft hubs. The company is currently investing $80bn in AI infrastructure, including data centres and chips.

Microsoft’s AI push has seen it hire AI pioneer Mustafa Suleyman to lead its Microsoft AI division and deepen ties with OpenAI. However, tensions have reportedly grown in that relationship. Bloomberg noted difficulty in selling Microsoft’s Copilot tool, as many users prefer ChatGPT.

At the same time, AI talent wars are heating up. Meta has reportedly offered huge bonuses to poach researchers, while Amazon’s Andy Jassy said last month that AI would eventually replace certain roles at his company.

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