In a nutshell

• Massive restructuring at Microsoft Gaming: Roughly 9,000 employees across the organization have been let go, with key Xbox studios like Turn10 and Rare impacted.
• Projects affected: Rare’s Everwild and Perfect Dark reportedly cancelled.
• Studios and teams affected: Turn10, Rare, and Zenimax Europe all saw substantial layoffs. The Initiative has reportedly shut down.

Following reports of massive layoffs at Microsoft, new reports are pouring in that detail the extent at which Xbox has been hit.

Microsoft has confirmed a major round of layoffs affecting approximately 9,000 employees, which is about 4% of its global workforce. As expected, Xbox doesn’t get away unscathed, with key studios and projects being hit.

Key Xbox Studios and Projects Hit

As reported by VGC, Rare’s ambitious project Everwild has been cancelled. Sources close to the studio cite restructuring and shifting priorities, with reports also pointing out that veteran designer and Sea of Thieves director Gregg Mayles is also departing in the wake of the announcement.

Perfect Dark has reportedly been shuttered as well, which is surprising given the fact that it was on the Xbox Games Showcase just last year. The Initiative, developers of Perfect Dark in collaboration with Crystal Dynamics, is also shutting down.

Xbox Games Studio Head Matt Booty reportedly shared an internal email confirming these closures, with the full email featured below:

“Following Phil’s note, I want to share more about the changes to the Studios business units.

We have made the decision to stop development of Perfect Dark and Everwild as well as wind down several unannounced projects across our portfolio. As part of this, we are closing one of our studios, The Initiative. These decisions, along with other changes across our teams, reflect a broader effort to adjust priorities and focus resources to set up our teams for greater success within a changing industry landscape. We did not make these choices lightly, as each project and team represent years of effort, imagination, and commitment.

Our overall portfolio strategy is unchanged: build games that excite our players, continue to grow our biggest franchises, and create new stories, worlds, and characters. We have more than 40 projects in active development, continued momentum on titles shipping this fall, and a strong slate headed into 2026.

For those directly affected, we are working closely with HR and studio leadership to provide support, including severance, career transition assistance, and where possible, opportunities to explore roles on other teams.

To everyone across our studios: thank you. Your creativity and resilience continue to define who we are. I believe in the strength of our teams and the direction we’re taking on the path ahead.”

Other studios such as Turn10, known for Forza Motorsport, is also facing several layoffs as well. Alongside this, other studios such as ZeniMax Online, King, Raven, Sledgehammer, and more have also reportedly been hit. ZeniMax Online Studios boss Matt Firor has confirmed to be leaving the company alongside ending development on an unannounced project that was supposed to take over The Elder Scrolls Online.

Microsoft Gaming CEO Phil Spencer had shared a heartfelt letter with employees, confirming the impact of the layoffs but also pointing out the company’s commitment to long-term growth and success.

“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.“

“We will protect what is thriving and concentrate effort on areas with the greatest potential, while delivering on the expectations the company has for our business. This focused approach means we can deliver exceptional games and experiences for players for generations to come.“