In the new AI economy, it seems no job is safe, not even at a thriving business. Microsoft’s Xbox division is a case in point. Last quarter, its revenue soared by 8% year over year. And yet, the division is now at the center of the tech giant’s largest wave of layoffs since 2023, with thousands of its employees among the 9,000 jobs cut by Microsoft on Wednesday.
In a memo sent to his shell-shocked employees and reviewed by Gizmodo, Microsoft’s head of gaming, Phil Spencer, performed a masterclass in corporate doublespeak. He announced a massive new round of layoffs across the Xbox division, all while insisting that business has never been better.
“I recognize that these changes come at a time when we have more players, games, and gaming hours than ever before,” Spencer wrote. “Our platform, hardware, and game roadmap have never looked stronger.”
Xbox's Phil Spencer confirms layoffs impacting Microsoft Gaming unit in an internal memo shared with staff. "To position Gaming for enduring success and allow us to focus on strategic growth areas, we will end or decrease work in certain areas of the business." pic.twitter.com/9x5bHmNibZ — CharlieIntel (@charlieINTEL) July 2, 2025
And yet, in the same breath, he confirmed that thousands of jobs would be eliminated and that the company will “end or decrease work in certain areas of the business.” A separate memo from Xbox Game Studios head Matt Booty made the damage concrete: long-awaited, ambitious titles like Perfect Dark and Everwild are being canceled, and at least one studio, The Initiative, one of Microsoft’s newer, high-profile studios, is being closed entirely.
So what’s really going on? If the company is stronger than ever, why fire thousands of people and scrap years of creative work?
The answer isn’t in what the memos say, but in what they omit: artificial intelligence.
The corporate jargon about “agility,” “effectiveness,” and “removing layers of management” is a convenient smokescreen for a calculated and ruthless strategic pivot. Microsoft is moving toward a new model of game development, one that requires fewer humans. These layoffs appear as the first major casualties of the company’s new AI-driven efficiency doctrine.
“The success we’re seeing currently is based on tough decisions we’ve made previously,” Spencer wrote. “We must make choices now for continued success in future years.”
When asked to comment on the apparent contradiction between Phil Spencer’s claims of record success and the thousands of job cuts, a Microsoft spokesperson declined.
... continue reading