The cuts, they keep coming. Microsoft is conducting another round of layoffs in 2025, targeting around 4% of its workforce across divisions and sectors. Microsoft’s July cuts come just as the company enters its 2026 fiscal year with reorganization efforts leading the way for its high-priority investments. The organizational changes are believed to be “necessary to best position the company and teams for success in a dynamic marketplace,” according to a Microsoft spokesperson.
The Microsoft cuts were confirmed across divisions, including the gaming segment at Xbox, highlighting the fact that despite the gaming division making big investments in hardware and promising advancement with upcoming games, the company does not equate success with retention. The exact number of Xbox employees affected is unknown, but the cuts are expected to be heavy and hard-hitting.
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Microsoft Layoffs in 2025 Continue, More Cuts Are Coming
From forcing AI on employees to setting stricter performance evaluation metrics, Microsoft is exploring all its routes towards increasing the company’s performance exponentially. Harshest of all, Microsoft’s layoffs in 2025 continue to escalate as many employees are caught in the crossfire of reorganization efforts. With the start of its 2026 fiscal year, Microsoft’s job reduction efforts will affect 9,000 workers or approximately 4% of the company’s overall workforce.
According to AP News, about 830 of these workers are from the Microsoft headquarters in Redmond, Washington. From the sales division to the gaming segment, workers will be affected across geographical areas and levels of experience, so we have no estimates available on the metrics being used to initiate the cuts. The company previously expressed a desire to flatten the management layer, which could determine how the current cuts progress as well.
From the HoloLens and Azure cloud teams to those at Activision Blizzard and other Microsoft Gaming teams, layoffs have been witnessed across the organization already in recent years. Despite the scale of those previous cuts, Microsoft is not done with its reorganization efforts.
Microsoft Xbox’s Job Cuts Disappoint Gamers
Microsoft’s Xbox division job cuts are particularly news-worthy as it could affect multiple studios and teams, and could lead to the erasure of more games that were promised to fans. Xbox CEO Phil Spencer explained, “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 and follow Microsoft’s lead in removing layers of management to increase agility and effectiveness.”
Bloomberg was able to identify some of the consequences of the Microsoft 2025 layoffs, noting that the company’s Stockholm-based King division was laying off 10% of its staff, or approximately 200 workers. Turn 10 Studios is also being cleaved in half, with nearly 50% of its staff on the way out. The Initiative studio is even worse off, with a complete shutdown after the cancellation of its Perfect Dark reboot project. More projects from other studios have been cancelled as well, leaving many gamers disappointed.
Spencer even acknowledged that the gaming division was performing well and that the organization was well-placed for success, but then stated the cuts were essential to keep the momentum going. “I recognize that these changes come at a time when we have more players, games, and gaming hours than ever before. Our platform, hardware, and game roadmap have never looked stronger,” he said in an email to staff.
“The success we’re seeing currently is based on tough decisions we’ve made previously. We must make choices now for continued success in future years, and a key part of that strategy is the discipline to prioritize the strongest opportunities,” he continued.
Microsoft Employees Suffer for the Company’s Ambitions
The Microsoft job reduction plans may feel essential to the company from a business point of view, but for employees who have aided the company in accomplishing all that it has, these cuts feel exceedingly cruel. Of course, outgoing employees are expected to receive some assistance in their transition to unemployment.
In Spencer’s email to employees, he confirmed that HR teams were working to provide appropriate severance benefits such as pay, healthcare coverage, job placement support, and priority processing if these employees choose to apply to another open position at Microsoft Gaming. We expect similar benefits to be available to workers being shelved at the rest of the organization as well.
While Microsoft is well-placed for growth in many market segments, the company appears to be operating from a point of caution in preparation for greater competition in the future. Unfortunately, many employees are not going to be welcome on the journey forward. While its HR teams are likely dealing with the outgoing employees to guarantee a smooth exit, it is also important for them to ensure that the fallout from layoffs at such a scale is well-tempered.
Following Microsoft’s most recent layoffs for 2025, employees are going to be on edge, worried that their jobs will be targeted next. Such a morose atmosphere can be very damaging to a business, and organizations that join Microsoft with job reductions of their own should take such consequences into consideration before proceeding with cuts across their business.
Is this the last we’ll hear of Microsoft layoffs in 2025? Let us know what you think. Subscribe to The HR Digest for more insights into the ever-evolving landscape of work and employment.
