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Microsoft launched its latest fiscal year by announcing that around 4% of its workforce — that’s 9,000 people, give or take — would be laid off with cuts hitting its Gaming division especially hard.

In a message to employees sent July 1, CEO of Microsoft Gaming Phil Spencer wrote, “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.” Elsewhere in the memo, he added, “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. 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.”

While specific numbers have not been officially released, Bloomberg is reporting that around 10% of Candy Crush studio King has been laid off, estimated to be in the region of 200 workers, with VGC adding that Seas of Thieves developer Rare has also been impacted, with its as-yet-unreleased game Everwild — originally announced back in 2019 — now officially canceled as a result. What other projects may be impacted by the layoffs remains to be seen.

The layoffs follow 6,000 employees being let go by Microsoft in May and June of 2025, which itself followed the layoff of some 1,900 employees from Activision Blizzard and Xbox in January 2024, with a further 650 laid off from Xbox eight months later.

As noted by the Seattle Times, Microsoft has previously announced a $25 billion increase in spending on AI infrastructure inside the company, bringing the total to $80 billion yearly.

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