Phil Spencer: Xbox Future Strong Despite Microsoft Gaming Layoffs
▼ Summary
– Microsoft has started new layoffs in its gaming division, cutting 10% of staff at King and affecting other European studios, with US studios to be notified soon.
– The company previously announced plans to reduce its workforce by 3% (nearly 7,000 employees) and had already cut 10,000 jobs in 2023 and over 2,500 in 2024.
– Despite layoffs, Microsoft reported record performance in 2024, with $245 billion in revenue and $109 billion in operating income, per CEO Satya Nadella.
– Xbox head Phil Spencer stated the gaming division is thriving but emphasized the need for tough decisions to prioritize future success and focus on high-potential areas.
– Microsoft is shifting focus toward AI, pressuring employees to use AI tools internally, while layoffs continue, affecting around 9,000 workers (less than 4% of its workforce).
Microsoft’s gaming division faces significant layoffs, but Xbox leadership remains confident about the future despite workforce reductions. Reports indicate the company has initiated another round of job cuts, starting with a 10% reduction at King, the social gaming developer behind hits like Candy Crush. Additional layoffs are expected across European and U.S.-based studios, following broader corporate restructuring efforts.
This latest wave follows Microsoft’s earlier announcement to trim 3% of its workforce, nearly 7,000 employees, earlier this year. The company has already eliminated over 10,000 jobs in 2023 and another 2,500 in 2024. Despite these cuts, Microsoft’s financial performance remains strong, with CEO Satya Nadella highlighting record revenue of $245 billion in the 2024 annual report, alongside a 24% increase in operating income.
In an internal memo, Phil Spencer, head of Xbox, reassured employees that the gaming division is thriving. He emphasized that Xbox’s platform, hardware, and game lineup are stronger than ever, attributing current success to past strategic decisions. “We must make tough choices now to ensure long-term growth,” Spencer stated, adding that the company will focus on high-potential areas while maintaining its commitment to delivering top-tier gaming experiences.
Critics, however, question the timing of these layoffs, which coincide with Microsoft’s aggressive push into AI. Nadella has repeatedly emphasized AI as a core priority, even reportedly pressuring employees to adopt internal AI tools. Some industry observers argue that diverting resources from gaming, a sector with proven demand, to AI initiatives that lack clear employee enthusiasm may not be a sustainable strategy.
A Microsoft spokesperson confirmed the layoffs affect less than 4% of the total workforce, clarifying that while gaming teams are impacted, they are not the primary focus of the cuts. The company maintains that these changes are necessary to stay competitive in a rapidly evolving market.
As Xbox moves forward, the challenge will be balancing innovation with stability, ensuring that short-term restructuring doesn’t undermine the long-term health of one of gaming’s most influential brands.
(Source: PCGAMER)
