Update 1, July 2: Bloomberg’s Jason Schreier has shared on BlueSky that he’s heard the long-gestating Rare game Everwild has been cancelled amid the cuts. Microsoft has not commented on the matter.

Original story, July 2:Microsoft has begun making layoffs across its gaming division today, July 2, as was expected based on multiple rumours and reports from last week.

According to Bloomberg, Microsoft’s King mobile gaming division is laying off 200 people, or around 10% of the workforce, in Barcelona, Spain.

Employees in ZeniMax’s European offices have also been informed that cuts are underway, says the report.

Bloomberg’s story mentions that US offices are expecting to be told how many staff will be laid off at each office later today. CNBC reports that this is part of a larger 4% round layoffs at Microsoft.

The layoffs coincide with the end of Microsoft’s financial year on June 30. This is the fourth round of layoffs at Microsoft’s gaming division in 18 months. Microsoft laid off 3% of its staff back in May.

Xbox head Phil Spencer addressed the cuts in a memo to staff, as shared with IGN.

“Today we are sharing decisions that will impact colleagues across our organization. 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 and follow Microsoft’s lead in removing layers of management to increase agility and effectiveness. Out of respect for those impacted today, the specifics of today’s notifications and any organizational shifts will be shared by your team leaders in the coming days.

“I recognize that these changes come at a time when we have more players, games, and gaming hours than ever before. Our platform, hardware, and game roadmap have never looked stronger. The success we’re seeing currently is based on tough decisions we’ve made previously. We must make choices now for continued success in future years and a key part of that strategy is the discipline to prioritize the strongest opportunities. We will protect what is thriving and concentrate effort on areas with the greatest potential, while delivering on the expectations the company has for our business. This focused approach means we can deliver exceptional games and experiences for players for generations to come.

“Prioritizing our opportunities is essential, but that does not lessen the significance of this moment. Simply put, we would not be where we are today without the time, energy, and creativity of those whose roles are impacted. These decisions are not a reflection of the talent, creativity, and dedication of the people involved. Our momentum is not accidental — it is the result of years of dedicated effort from our teams.

“HR is working directly with impacted employees to provide severance plan benefits (aligned with local laws), including pay, healthcare coverage, and job placement resources to support their transition. Employees whose roles were eliminated are encouraged to explore open positions across Microsoft Gaming, where their applications will be given priority review.

“Thank you to everyone who has shaped our culture, our products, and our community. We will move forward with deep appreciation and respect for all who have contributed to this journey.”

This story will be updated as more information is learned about which studios or parts of the division are affected by the cuts.

Xbox has not commented publicly on the layoffs yet, and did not answer a request for comment from GamesIndustry.biz based on last week’s reports.

During its most recent round of results for Q3 2025, Microsoft revealed that revenue increased 5% year-over-year for its gaming segment.

Updated with Phil Spencer memo and CNBC report on wider Microsoft layoffs.