Microsoft’s Layoffs Hit Xbox Hard; Studio Closures, Game Cancellations Confirmed

Microsoft’s latest round of layoffs, impacting roughly 9,000 employees, has now reached the Xbox division, and the fallout is severe. According to Windows Central, an internal email from Xbox Game Studios head Matt Booty confirmed canceled projects, lost jobs, and at least one major studio shutdown.

The Initiative, formed seven years ago, is being closed. The studio was working with Crystal Dynamics on a reboot of Perfect Dark, which is also now canceled.

“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,” wrote Booty in the internal email.

Microsoft is encouraging displaced developers to apply for other roles within the company. But that’s not the only cut: Everwild, the long-in-development Rare project first announced in 2019, has also been scrapped. The game had been rebooted internally at least once.

Adding to the damage, Bloomberg’s Jason Schreier reports that Blackbird, an unannounced MMORPG from ZeniMax Online, has been canceled too. That project had been in the works since 2018.

Reports also say that King, the mobile game developer, is losing at least 10% of its staff. Turn 10, the Forza Motorsport studio, may be facing cuts as steep as 50%. Raven Software, known for Call of Duty, is reportedly affected as well.

Booty closed his message by emphasizing the company’s direction, “We have more than 40 projects in active development, continued momentum on titles shipping this fall, and a strong slate headed into 2026.”