Microsoft trims 9,000 jobs, cancels three Xbox games

Microsoft announced major job cuts on Wednesday, letting go of about 9,000 workers across the company, as reported by The New York Times, due to the company's focus on artificial intelligence investments. This represents roughly 4 percent of Microsoft's total workforce and marks the second major layoff round this year. The company previously cut about 6,000 jobs in May, showing a pattern of workforce reduction despite strong financial performance. Microsoft had 228,000 employees at the end of June 2024, according to their most recent count. 

The company continues to make billions in quarterly profits and has reached a market value of almost $3.7 trillion. However, Microsoft is spending heavily on artificial intelligence development, including billions spent on data centers for cloud computing and AI services. The New York Times notes that Microsoft's AI coding tool, GitHub Copilot, now serves more than 15 million users, demonstrating how AI might replace some human workers. Other tech companies are also expecting AI to reduce their workforce needs, with Amazon's CEO recently telling employees that corporate staff numbers will likely shrink as AI becomes more widely used throughout the company.

The layoffs are hitting Microsoft's gaming division particularly hard, with several major game projects being canceled entirely, according to CNET's reporting on the gaming industry impact. Xbox Game Studios has stopped development on highly anticipated games, including Perfect Dark and Everwild, along with other unannounced projects. The company is also closing The Initiative, one of its game development studios. Phil Spencer, who leads Microsoft's gaming division, explained in a staff memo that these changes are needed to position the gaming business for long-term success and focus resources on strategic growth areas. 

CNET confirms that the Perfect Dark reboot and Everwild were among the casualties of these cuts. Everwild had been in development for nearly a decade since being announced in 2019, but reportedly struggled to find a clear direction throughout its development process. The game's development was even restarted in 2021 due to various challenges. Additionally, a new online multiplayer game codenamed Blackbird from Zenimax Online Studios, the creators of Elder Scrolls Online, has also been canceled. This unnamed project had been in development since 2018 and was intended to serve as a potential successor to Elder Scrolls Online.

The workforce reduction affects multiple departments and locations worldwide, with 830 positions being eliminated at Microsoft's main headquarters in Redmond, Washington, as documented by AP News through state employment records. Microsoft describes these cuts as part of necessary organizational changes to succeed in today's competitive technology market. The company is removing management layers to increase efficiency and allow managers to oversee more employees directly. AP News reports that the cuts span across various divisions, including sales teams and the Xbox video game business. This represents Microsoft's largest single layoff in more than two years, though the company has already conducted at least three separate layoff rounds throughout this year. 

The timing coincides with Microsoft's new fiscal year, which began on Tuesday, suggesting these cuts were planned as part of broader restructuring efforts. Microsoft executives have been discussing ways to reduce bureaucracy and streamline operations in recent months. The company's finance chief previously mentioned increasing agility by reducing management layers, and these latest cuts appear to continue that strategy while also reflecting the broader trend of technology companies adjusting their workforce as artificial intelligence capabilities expand and potentially replace certain job functions.