Microsoft cuts 650 gaming jobs after Activision deal

Microsoft is cutting about 650 jobs in its videogame business, according to the Wall Street Journal, adding another round of belt-tightening after its Activision Blizzard purchase. For everyday investors, the move is a reminder that even the largest tech companies are still trying to make expensive acquisitions pay off while gaming demand remains softer than it was during the pandemic surge.

The Journal reported Thursday that it reviewed an email from Phil Spencer, chief executive of Microsoft Gaming, outlining the layoffs. Spencer said in the email that Microsoft will not close studios and will not cancel any games, devices or player experiences as part of this round, according to the Journal.

The cuts follow Microsoft’s $75 billion acquisition of Activision Blizzard last year. That deal brought major franchises and more scale to Microsoft’s gaming operation, but it also left the company with the task of combining teams and costs across Xbox, Activision Blizzard and other gaming assets.

Layoffs are one way companies reduce operating expenses, which are the ongoing costs of running a business, including salaries, benefits and office-related spending. For shareholders, lower costs can support profit margins, which measure how much revenue turns into profit. For employees, the same process can mean job losses even when a company remains profitable overall.

Another round after earlier gaming cuts

Microsoft had already reduced headcount in the same broader unit earlier this year. The company laid off about 1,900 workers from the gaming business at the start of the year, according to the Journal report cited by MarketWatch. In May, Microsoft also closed three studios.

The latest round is smaller than the earlier 1,900-person reduction, and Spencer’s email said this time there would be no studio closures or project cancellations, according to the Journal. That distinction matters because investors often watch whether job cuts are limited to back-office or overlapping roles, or whether they signal deeper trouble with products and creative output.

Gaming is still resetting after the pandemic boom

The broader videogame market expanded during the pandemic as stay-at-home rules pushed more people toward home entertainment. Demand began slowing in 2022 and has only recovered modestly since then, according to MarketWatch.

That slowdown has put pressure on publishers, console makers and gaming platforms to be more selective with spending. Microsoft’s gaming division sits inside one of the world’s largest technology companies, but it is still exposed to the same consumer pattern: people can delay buying games, hardware or subscriptions when budgets tighten or when fewer blockbuster releases pull them in.

Microsoft shares were little changed in premarket trading, meaning before regular U.S. stock-market hours, according to MarketWatch. The stock was up 12.5% for the year to date, while the S&P 500 had risen 16.4% over the same period, MarketWatch reported.

That gap shows Microsoft shares had trailed the broader index so far in 2024, even as the company remained a central name in large-cap tech. The gaming layoffs add one more cost-control story for investors to watch as Microsoft works through the integration of Activision Blizzard.

This story draws on original reporting from MarketWatch.