Microsoft Layoffs July 2025: Perfect Dark Cancelled, Xbox Studios Hit Hard

In a significant corporate development, Microsoft has confirmed the layoff of approximately 9,000 employees worldwide in July 2025. This move, which affects roughly 4% of the company’s global workforce, comes amid ongoing internal restructuring efforts.

The layoffs span multiple departments including sales, marketing, engineering, and—most notably—Xbox Game Studios. Several high-profile game projects, including the long-anticipated Perfect Dark reboot and Rare’s Everwild, have also been cancelled as a result.

Perfect Dark Reboot Cancelled as The Initiative Shuts Down

One of the most notable consequences of the recent layoffs is the cancellation of the Perfect Dark reboot, which had been in development at Xbox's Santa Monica-based studio, The Initiative. The project, first revealed in 2020, was envisioned as a high-budget, narrative-driven spy thriller that would mark the revival of a beloved franchise originally launched on the Nintendo 64.

With the closure of The Initiative, Microsoft has effectively ended all development on the title. Multiple former employees confirmed the cancellation across social media platforms following their terminations. The decision marks a major shift away from experimental, high-risk IPs within Xbox's portfolio.

Everwild Project Discontinued at Rare Amid Wider Xbox Layoffs

Alongside Perfect Dark, another ambitious title—Everwild, developed by Rare—has also been cancelled. Introduced in 2019, Everwild drew attention for its artistic design and mystical themes but reportedly suffered from unclear direction and repeated internal delays.

The cancellation of Everwild comes with the departure of Rare’s creative director Gregg Mayles, a veteran who had been with the company for more than 30 years. Microsoft confirmed that the project had been quietly shelved to "reallocate resources to more commercially viable opportunities."

Call of Duty Development Teams Also Impacted

The layoffs also affected Microsoft-owned Activision Blizzard, where several teams involved in the Call of Duty franchise—such as Raven Software and Sledgehammer Games—were hit. Despite Call of Duty remaining one of the top-selling game franchises globally, sources suggest Microsoft is attempting to streamline overlapping roles following its 2023 acquisition of Activision Blizzard.

These changes are part of a broader cost-efficiency strategy and reflect Microsoft’s increased focus on live-service games, subscription models, and artificial intelligence integration.

IGN and Other Industry Sources Confirm Studio-Wide Cuts

Gaming publication IGN and other major industry outlets have confirmed the widespread impact of the layoffs across Xbox Game Studios. According to reports, other Microsoft subsidiaries including ZeniMax Online Studios, developers of The Elder Scrolls Online, have also been affected. A previously unannounced MMO project codenamed Blackbird has been terminated.

The job cuts come just months after Microsoft laid off 6,000 employees in May 2025. The tech giant said these moves are part of long-term efforts to reduce operational complexity and increase investment in key growth areas such as AI, Copilot, and Azure.

Microsoft Reaffirms Commitment to Gaming Despite Reductions

In an official statement, a Microsoft spokesperson noted:
“These difficult decisions are necessary to align our resources with our strategic priorities. While gaming remains a core pillar of our vision, we must also ensure long-term sustainability and innovation.”

Despite the restructuring, the company insists it remains committed to the Xbox platform and Game Pass ecosystem. Several other projects—such as Fable, Avowed, and Senua’s Saga: Hellblade II—are still in development and expected to be showcased at future industry events.

Conclusion: A Pivotal Moment for Microsoft and Xbox

The Microsoft layoffs in July 2025 represent a major turning point for both the company and the future of Xbox. With beloved titles like Perfect Dark and Everwild now cancelled, and prominent studios like The Initiative shuttered, Microsoft appears to be pivoting toward a leaner, more service-focused gaming strategy.

As the company doubles down on AI and cloud computing under the MSFT banner, the impact on creative game development remains a key concern among fans and industry veterans. Time will tell whether this shift will help Xbox remain competitive in a rapidly evolving gaming landscape.