Xbox Layoffs 2025: Microsoft’s Gaming Division Faces Major Shake-Up

Well, this one’s gonna sting a bit. Just as gamers gear up for a wild second half of 2025, reports are swirling that Xbox layoffs are about to hit hard—and soon. According to industry insiders, Microsoft is allegedly preparing for a wave of “major” job cuts in its Xbox division as early as this week. Yeah… not exactly the kind of power-up we were hoping for.

In addition to Bloomberg’s report, The Verge has also said Microsoft is set to restructure Xbox distribution across central Europe. According to one source, this will result in “some Xbox operations ceasing in some regions”.

^{Source: Eurogamer}

What’s Going on at Xbox?

It’s been a shaky couple of years for Xbox. Despite having top-tier exclusives like Starfield and legacy studios under their belt—not to mention the monster acquisition of Activision Blizzard—Microsoft’s gaming division hasn’t seen the return they probably expected. And now, it seems leadership is looking to trim the fat. Let’s not beat around the bush: more Microsoft Xbox job cuts are in the pipeline.

While exact figures haven’t been confirmed, sources say this won’t be a small shuffle. These aren’t just interns or temporary testers—they’re reportedly significant layoffs affecting multiple studios under the Xbox brand. Some speculate it’s part of Microsoft’s broader effort to “streamline” its gaming business heading into 2026.

Déjà Vu: Haven’t We Been Here Before?

If you’re getting an odd sense of déjà vu, it’s because this isn’t Xbox’s first big internal shakeup. Back in 2023 and again in 2024, Microsoft axed thousands across various departments, including at Bethesda and the now-rumoured-to-be-merged Blizzard Entertainment. Those earlier layoffs sent waves through the dev community. And just as things were starting to look stable—bam—back at it again with the pink slips. It all brings up the same old questions: Is Xbox really making the right calls? Or is this just damage control after slumping console sales and Game Pass subscriber numbers stagnating?

Studios in the Crosshairs

As of now, there’s no official confirmation on which studios are in the danger zone. But naturally, the speculation machine is in full throttle. With the Xbox Series X/S family struggling to outsell its PS5 rival worldwide—and Microsoft’s pivot towards cloud and mobile gaming—some insiders suspect smaller support studios and backend tech teams could feel the burn. Fans are already concerned about what this means for upcoming games and DLC content. If development teams get hit, there’s a legit chance of delays, or worse… project cancellations.

🗣️ “There’s a sense that Xbox management is repositioning priorities—again,” shared one anonymous employee via Discord. “People are tense.”

Fans React – “This Ain’t It, Chief”

The online chatter isn’t pretty. Players took to Reddit, Discord, and X to voice their frustration. After Microsoft’s massive studio acquisitions, fans expected a flood of AAA hits. Instead, many feel like they’ve been promised more than delivered. And now, with news of more Xbox layoffs in 2025, frustration is climbing fast. One popular Reddit thread said it best: “You can’t buy up the industry and then whittle it down like this. Something doesn’t add up.” Powerfully put, internet stranger.

The Bigger Business Picture

Microsoft’s earnings have remained solid overall, but zooming in on the Xbox division paints a murkier picture. While Game Pass did cross 40 million users earlier this year, growth has reportedly plateaued. Add to that the lingering production costs of next-gen hardware and the massive financial weight of the Activision merger—and yeah, someone had to start making uncomfortable decisions. Insiders believe this reduction is aimed at reducing redundancy between overlapping departments acquired through studio mergers. And while that makes sense on paper, it’s cold comfort to the devs who suddenly find themselves without a gig.

Here’s what we do know: Microsoft’s going to have a lot of explaining to do. With layoffs rumoured to drop next week, all eyes will be on the Xbox team’s next moves—especially Phil Spencer’s next public appearance, which could arrive via a livestream or industry event in early July. If this news drops before that, expect a whole storm of questions. For developers, this isn’t just about job cuts—it’s about morale. For gamers, it’s about the future of an ecosystem they’ve bought into. And for Microsoft? It’s about whether they can finally start balancing their ambitious vision with the reality of today’s gaming market.