Microsoft has laid off 9,000 employees across the company, and its Xbox division is once again feeling the effects. Major game cancellations, a full studio closure, and cuts across multiple teams have followed the company’s latest round of restructuring.
Perfect Dark and Everwild have both been cancelled after years in development. The Initiative, the studio behind Perfect Dark, has been shut down. Other teams at Rare, ZeniMax Online, Blizzard, and Turn 10 have also been hit. This marks the fourth round of layoffs at Xbox in just 18 months, part of a broader shift inside Microsoft to focus on fewer projects and reduce layers of management.
While the company says more than 40 games are still in development, the impact across its gaming division is hard to ignore. Here’s a full look at which projects were cancelled, which studios were affected, and what Xbox leadership has said so far.
Which Games Were Cancelled?
Several long-running projects were cancelled as part of Microsoft’s latest restructuring. The reboot of Perfect Dark, in development since at least 2018, has officially been shut down. So has Everwild, Rare’s original fantasy game first revealed in 2019. Both titles had faced years of internal changes and reboots before being cut this month.
ZeniMax Online Studios’ unannounced MMORPG, codenamed Blackbird, was also cancelled. The game had been in development since 2018 and was reportedly planned as a successor to The Elder Scrolls Online. The project never reached a public reveal.
Romero Games’ upcoming first-person shooter was cancelled as well. The team had secured funding in 2022 and was building the game in Unreal Engine 5. Co-founder Brenda Romero confirmed the decision came from the game’s publisher at a level beyond the studio’s control.
Blizzard’s mobile game Warcraft Rumble will no longer receive new content and has moved to live ops only.
Studios That Were Shut or Hit by Layoffs
Alongside game cancellations, several Xbox-owned studios were directly impacted by the layoffs. Some saw entire projects shut down, while others faced significant staff reductions.
- The Initiative, the studio behind the cancelled Perfect Dark reboot, was officially shut down. Microsoft founded the team in 2018, but it never released a game.
- Rare, the studio behind Everwild and Sea of Thieves, was also affected. Everwild has been cancelled, and longtime designer Gregg Mayles is reportedly among those let go.
- Turn 10 Studios, best known for Forza Motorsport, lost nearly half its team. Reports suggest more than 70 staff were let go, affecting teams across departments.
- ZeniMax Online Studios cancelled its unannounced MMO codenamed Blackbird. The studio also saw internal cuts, and president Matt Firor is stepping down after 18 years.
- King, known for Candy Crush, laid off around 200 employees in its Barcelona office, roughly 10 percent of its workforce.
- Blizzard confirmed it will no longer add new content to Warcraft Rumble, shifting the game to a live ops-only model. Around 100 people were reportedly laid off across the Rumble team, marketing, and customer service.
- Halo Studios, formerly 343 Industries, confirmed at least five layoffs. Reports estimate the studio now has between 200 and 300 staff. Internal sources describe strained morale and frustration over leadership messaging.
Raven Software, Sledgehammer Games, High Moon Studios, and Undead Labs were also affected. While numbers haven’t been confirmed, multiple employees at each studio have shared layoff updates publicly.
Leadership Response from Microsoft
Following the layoffs, internal memos from Xbox leadership offered some explanation. In a message to staff, Xbox Game Studios head Matt Booty said the company had made “the decision to stop development of Perfect Dark and Everwild, as well as wind down several unannounced projects.” He also confirmed the closure of The Initiative and emphasized that more than 40 projects are still in active development across Xbox.
Booty described the cuts as part of a broader shift to “adjust priorities and focus resources” as the industry continues to change. He said the goal is to better position Xbox teams for long-term success.
Microsoft Gaming CEO Phil Spencer echoed that message in a separate memo. He stated the layoffs were meant to “increase agility and effectiveness” by reducing management layers and focusing on areas with the most potential. Those affected are being offered severance, healthcare coverage, and priority consideration for other internal roles.
The Impact on Developers and the Industry
Beyond the studio closures and project cancellations, the layoffs had a clear personal and emotional toll. At Halo Studios, one developer told Engadget they were frustrated by leadership messaging. They described being “super pissed” that Phil Spencer’s internal email mentioned record Xbox profits while announcing job cuts. The same developer noted that morale had already been low due to internal project struggles.
At Romero Games, the team lost project funding after what the studio described as a strategic decision made at a high level by its publisher. While Microsoft wasn’t named directly, multiple developers affected by the cuts pointed to the company in their public posts. Several employees confirmed the layoffs on LinkedIn, including artists, producers, and long-time staff. Some referred to it as a result of Microsoft’s latest wave of layoffs, while others said the studio may be closing down, though that has not been confirmed. Studio co-founder Brenda Romero said the team is working to support everyone impacted, calling it an “extremely difficult day.”
These reactions reflect a broader frustration shared by many in the industry as layoffs continue to affect even well-performing teams.
The Future of Xbox After the Cuts
Microsoft says that more than 40 projects are still in development across its Xbox studios. Games shown during the June 2025 Xbox Games Showcase are continuing as planned, according to internal memos and multiple reports. Titles like Clockwork Revolution, State of Decay 3, and other previously announced projects have not been affected by the cuts.
Xbox leadership has also stated that the company’s game roadmap, hardware strategy, and platform plans remain strong. Fall releases are still on track, and the company is expected to share more updates later this year. Internally, Xbox is focusing on what it calls “strategic growth areas,” while reducing management layers to increase efficiency.
While these changes aim to sharpen Xbox’s long-term focus, the short-term impact has left many teams smaller and several projects cancelled. For now, Xbox continues to move forward with a smaller portfolio and fewer studios than it had just weeks ago.
Speaking Honestly About What Happened
After weeks of speculation, Microsoft’s latest round of layoffs has hit Xbox hard. It has also left a clear mark on the wider game industry. Between cancelled games, closed studios, and widespread job cuts, many are now questioning where the company is heading with its gaming plans. Xbox leadership says the focus is on long-term growth, but the short-term cost is impossible to ignore.
I’ve followed Xbox since the original console, and this round feels heavier than the ones before. Seeing The Initiative close before releasing a single game is tough, especially after years of buildup around Perfect Dark. And while Rare’s Everwild never got past a few vague trailers, it still stings to see nearly a decade of work disappear overnight.
It reminded me of what Laura Fryer said in her recent comments about Xbox’s direction. She pointed out how the focus keeps shifting and how the messaging has become harder to follow. You can read more in our full write-up.
The Human Cost Behind the Headlines
What’s harder to process is how many people behind the scenes were affected. From senior veterans to developers just starting out, many now find themselves out of work despite hitting milestones and doing everything right. Reading their posts and seeing the pride they had in what they were building has been a reminder that these decisions go far beyond business.
It’s also hard not to notice how often creative teams are left vulnerable when strategies shift. The issue isn’t talent. It’s timing, budgets, and changing priorities. These are the kinds of losses you won’t see in a quarterly report. At the same time, Xbox’s leadership insists the platform’s future is strong. Games shown at the Xbox Games Showcase 2025 are still on track. But there’s a growing disconnect between what’s being said and what’s being felt by those impacted. And with Microsoft putting more focus on AI tools across its teams, the way games are being made is changing too.
While Xbox is in the spotlight this week, these kinds of cuts aren’t unique to Microsoft. Layoffs and cancellations are happening across the industry, and none of it feels easy to accept. Just because it’s widespread doesn’t mean it makes sense.
We’ll see how this reshaped Xbox looks in the months ahead. For now, the mood across the industry is quiet and uneasy. It’s a moment that deserves more than a memo.
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Hurtful to read 😕