Why is Microsoft Closing so Many Gaming Studios?

A big strategic realignment is the reason behind the massive layoffs. Microsoft wants to lead the AI revolution and a restructuring is a necessary evil.

Microsoft is focusing on AI technologies.

Microsoft has cut more than 9000 jobs early in 2025. One of the biggest gaming studios affected by this was The Initiative, who was working on the reboot of Perfect Dark. This was not the only Rare game cancelled, Everwild was another title shelved by the company from Redmond.

It seems that Microsoft is in the middle of a major restructuring that is focused on strategic growth areas such as AI. They want to get rid of legacy roles that can hinder decision-making inside the company.

Unifying all their platforms, regardless if it's an Xbox, a PC, or a smart device is Microsoft's ultimate goal. Cloud gaming is how they will be able to achieve it at the larger scale. They have already begun with phase 1 of this plan.

Microsoft is way ahead of the competition in terms of cloud gaming. Keep in mind that they are also a tech behemoth so they have the infrastructure to bet on other avant-garde technologies like cloud computing and AI.

Perceiving the layoffs as a merely negative thing is shortsighted. Microsoft's strategy is to remain strong at every front, including its gaming division. AI and cloud processing have certainly changed the landscape, and the tech giant from Redmond is doing what they have to realign and adapt to these everchanging times.