Microsoft's constant layoffs risk creating a culture of fear

The Verge

18-07-2025

I can't open LinkedIn without seeing a new post from a Microsoft employee who lost their job in the company's latest round of layoffs. Around 15,000 jobs have been eliminated at Microsoft over the past couple months — the biggest cuts at the company in more than a decade.
I've spoken to more than a dozen Microsoft employees in recent weeks, and everyone is concerned about the company's direction in this AI era. Morale is at an all-time low, and employees are worried that regular layoffs are simply the new normal.
Sources tell me that Microsoft's leadership team had the choice between reducing investment in AI infrastructure for the upcoming financial year or deeply cutting its headcount and operating expenses. It's very clear what route Microsoft chose.
These layoffs have been both broad and brutal. While you've likely read the headlines about the impact on Xbox games studios, Microsoft's other cuts go far deeper and are part of a bigger plan to restructure Microsoft around AI tools.
Microsoft has laid off technical specialists, business strategy experts, and product managers. The sales side of Microsoft, which is responsible for businesses adopting its latest technology, has been hit particularly hard. Even AI and cloud sales teams have seen cuts, and account managers across a variety of Microsoft products have lost their jobs, too.
Microsoft's layoffs have also impacted roles internationally, where an AI operations manager in Portugal proved susceptible to Microsoft's latest reductions. Some employees even discovered they had lost their job while on vacation, and one was laid off twice in around six months.
This doesn't mean MS is necessarily reducing headcount overall, as employees like Patrick Lyons are being forced to apply for other roles. That could mean Microsoft's headcount might actually be similar this year to 2024.
Experienced veteran employees were also cut recently. Former engineering manager HongQiao Li had spent nearly 21 years at Microsoft prototyping the early version of Copilot in Office, before the latest cuts. Trinh Tran, a senior partner technology strategist, had dedicated 23 years to Microsoft while building solutions for the company's cloud business and championing accessibility. Business strategy expert Darron Inman joined Microsoft in 1996 and is 'disappointed that I didn't quite make it to the 30-year mark.'
Microsoft's gaming business has been heavily impacted by the latest cull. Rare's Everwild and The Initiative's Perfect Dark games have been canceled, with The Initiative shutting down as a result. Blackbird, a new game from ZeniMax Online Studios, impressed Microsoft Gaming CEO Phil Spencer earlier this year, but it was canceled anyway. Blizzard is also sunsetting its Warcraft mobile game, just months after Activision wound down its Call of Duty: Warzone mobile game.
Forza Motorsport developer Turn 10 Studios was also hit hard by Microsoft's cuts. One source described the layoffs as leaving enough people behind to keep the game up and running. It looks like Turn 10 will simply be a support studio for the Forza franchise, so I doubt we'll see another Motorsport entry from the team.
Raven, Sledgehammer Games, Rare, ZeniMax Online Studios, Halo Studios, and King have all been impacted by the Xbox cuts. King, which is behind Candy Crush, is preparing to cut as many as 200 staff, with the London-based Farm Heroes Saga team already being cut in half. Laid off King staff are reportedly being replaced by the AI tools they helped build.
At Irish developer Romero Games, 100 jobs are also at risk after Microsoft pulled funding for a project they were working on. Microsoft reportedly had a meeting with Romero the day before the financing dried up, without any mention of the decision. Romero is now looking for another publishing partner for its game to avoid the studio's closure.
Rare's Gregg Mayles, a 35-year veteran, is leaving Microsoft following the Everwild cancellation, alongside Louise O'Connor, executive producer of Everwild. ZeniMax president Matt Firor is departing after 18 years leading the studio.
Microsoft has also cut its Xbox user research team in half. It's a key team that focuses on ensuring quality across Xbox games, the platform, and developer tools. Without user research teams, Microsoft could have more games shipping in a poor state like Redfall. The Xbox cuts have impacted community managers, designers, and branding experts, too.
While Microsoft didn't 'feel the burn' by launching a fiery Xbox controller in parallel with gaming layoffs this year, it still had some tone-deaf mishaps this time around.
Xbox executive producer Matt Turnbull recommended that laid off employees seek advice from AI chatbots to 'help reduce the emotional and cognitive load that comes with job loss.' The ID@Xbox team sent out an email blast about an AI roundtable at Gamescom as creatives rightfully worry about being replaced by AI.
'Using AI is no longer optional' inside some parts of Microsoft, as Julia Liuson, president of Microsoft's developer division, proclaimed in an internal memo recently. Microsoft is reportedly now asking some managers to evaluate employees based on how much they use AI tools. Judson Althoff, Microsoft's chief commercial officer, even boasted — in the same week that Microsoft slashed jobs — about the company saving more than $500 million last year in just its call centers thanks to AI.
To top off the mishaps, principal developer lead Mike Matsel posted a sloppy, AI-generated 'Xbox Graphics is hiring' image on LinkedIn, with a monitor's display on the wrong side. Microsoft has been regularly posting AI slop to its corporate blogs for more than a year now, without a care in the world about how bad the images look, so it's not surprising to see more employees following along.
This AI slop is generated by the same tools that Microsoft is trying to convince businesses to use. The company is still struggling to sell its $30 per user, per month Copilot subscription, and the layoffs that have impacted Microsoft's sales teams are part of a broader restructuring effort to bring in more technical salespeople to better demonstrate AI tools to businesses. To that end, Microsoft is reportedly replacing traditional salespeople with 'solutions engineers.'
Microsoft is competing with Google, Anthropic, Amazon, and even its AI partner OpenAI for a slice of the enterprise AI pie. If you mix that with AI infrastructure costs, you get the type of constant mass layoffs we've seen at Microsoft over the past 18 months.The atmosphere inside Microsoft is now very different from just a decade ago, when Microsoft was considered cool again and Satya Nadella had just been promoted to CEO and overhauled the company's culture to embrace a world beyond Windows. That culture change saw Microsoft make some huge acquisitions like LinkedIn and GitHub, and saw it really capitalize on the shift to cloud computing. Now, Microsoft risks creating a culture of fear as it pushes employees to adapt to the promises of AI, where surprise 'performance-related' job cuts can happen at any time, all because it's in an uncertain AI race that's costing tens of billions of dollars.
I'm always keen to hear from readers, so please drop a comment here, or you can reach me at [e-mail] if you want to discuss anything else. If you've heard about any of Microsoft's secret projects, you can reach me via email at [e-mail] or speak to me confidentially on the Signal messaging app, where I'm tomwarren.01. I'm also tomwarren on Telegram, if you'd prefer to chat there.
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