Microsoft Layoffs Reportedly Trigger Cancellation Of Long-Running Gaming Projects, Scaled-Back AI Chip Plans

Microsoft’s (MSFT) layoffs aren’t just reducing manpower, but have reportedly also led to the cancellation of multiple long-running gaming projects, including ‘Everwild’ from Rare Studio and a new online RPG from ZeniMax Online Studios.

Microsoft’s stock was trading flat during midday trade on Wednesday, while retail sentiment on Stocktwits was in ‘bearish’ territory amid ‘high’ levels of chatter. 

Staff at both Rare and ZeniMax were reportedly informed of the project terminations on Wednesday, according to a Bloomberg report. Another report by Windows Central claims that Xbox has cancelled the long-troubled project Perfect Dark.

The cancellations come amid Microsoft’s broader overhaul of its gaming division and coincide with the biggest round of layoffs the company has announced in nearly two years. Microsoft is laying off around 9,000 employees, or roughly 4% of its global workforce, as it seeks to bring costs under control. This follows the 6,000 job cuts announced in May, primarily across engineering and product teams.

Rare’s now-cancelled ‘Everwild’ game was first announced in 2019 and had been positioned as a major new intellectual property (IP) alongside ‘Sea of Thieves’. A report from VideoGamesChronicle said the project had been stuck in development limbo for years. 

Team members at Rare, known for making games like ‘Sea of Thieves’ and ‘Banjo-Kazooie,’ were among the employees notified that they would be getting laid off on Wednesday, according to Bloomberg’s report.

The report added that the new massively multiplayer online RPG project from Microsoft's Zenimax Online Studios, which develops ‘The Elder Scrolls Online,’ codenamed ‘Blackbird,’ has also been cancelled.

Sources told Bloomberg both cancellations are tied to a shift in Microsoft's Xbox strategy, which is now focusing on fewer, more commercially viable titles.

Microsoft’s Stockholm-based King division, which makes ‘Candy Crush’ and operates within the Xbox segment, is cutting 10% of its staff, which accounts for around 200 jobs. Layoffs were also confirmed across additional units such as Raven Software, known for its work on ‘Call of Duty.’

According to a report by The Information, in addition to layoffs, Microsoft is also scaling back its ambitions for AI chips. The action is reportedly in response to overcoming delays despite the aim of reducing their reliance on Nvidia (NVDA) for AI computing. 

Microsoft has been aggressively investing in AI. The company committed $80 billion in AI-related spending for 2025, with a focus on expanding its Azure cloud infrastructure to support AI workloads.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

Read also: Microsoft To Cut 9,100 Jobs In Biggest Layoff Since 2023 Amid AI-Driven Cost Pressures: Report