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Related article: https://thinkly.gold/2025/07/09/did-microsoft-laid-off-employees-ask-ai-for-help/
Success doesn’t always mean security—just ask thousands of Microsoft employees. Despite record profits and strong Xbox performance, the company is cutting 9,000 jobs to shift resources toward AI. While leadership praises growth, vague language hides the reality: talent is being sacrificed for strategy, and honesty took a back seat.
Microsoft’s Xbox CEO Just Explained Why the Company Is Laying Off 9,000 People. It’s Not Great
Author: Jason Aten
Earlier this week, Microsoft confirmed it was laying off 9,000 people, according to The Seattle Times. This follows a round of layoffs in May, and brings the total number to more than 15,000 people company-wide.
According to an email from Xbox CEO Phil Spencer, a number of the cuts came in his division, though the company did not reveal specifics about how many from which area were affected.
The layoffs aren’t especially surprising, considering that Microsoft is just one of many tech companies to be trimming its headcount. In most cases, the cuts come as companies try to free up resources to pour into the expensive pursuit of AI in everything.
That’s what makes the email from Spencer so interesting. In it, he explains the reasons for the cuts.
“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,” Spencer wrote. “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 thing is, that sounds a lot like it was written by someone trying very hard not to say the quiet part out loud. Specifically, it’s really hard to reconcile the part where the Xbox business has “never looked stronger,” and the part where the company has to lay off thousands of people. Literally, he says that they are currently as successful as they’ve ever been in an email where he’s telling thousands of people they no longer have a job.
Make no mistake—this isn’t about performance. Spencer even says so: “These decisions are not a reflection of the talent, creativity, and dedication of the people involved.” This isn’t about shrinking revenue, either—Microsoft just posted record profits.
The truth is, Microsoft is betting big on AI. That’s the real story. Not just at Xbox, but across the company. Microsoft is pivoting hard toward an AI-first future, and these layoffs are part of that shift. It turns out all those Nvidia chips cost a lot of money, and the quickest way to find some extra money seems to be to stop handing out paychecks.
Of course, instead of saying that directly, the company is hiding behind language that sounds encouraging and supportive while being remarkably opaque. Spencer’s memo tries to have it both ways. That’s something no leader should ever do.
For one, it doesn’t make sense to say that “our platform, hardware, and game roadmap have never looked stronger,” and then argue that the only way to ensure “continued success in future years” is to eliminate thousands of roles. If things are really that strong, then this kind of large-scale layoff raises a different kind of question: what, exactly, are you prioritizing?
According to Spencer, it’s “strategic growth areas.” That’s corporate shorthand for “the places we actually want to spend money,” which right now means AI and cloud services. Microsoft has made it clear that’s where its future is.
That’s fine, I guess. Companies evolve as technologies change, and the job of a leader is to look into the future and make the right bets. Microsoft is all in on AI, and it hasn’t made that a secret. The problem is trying to frame this as a move to “deliver exceptional games and experiences for players for generations to come” while gutting the teams who built the brand in the first place.
The thing is, it didn’t have to be communicated this way. Spencer could have just said: “The business is healthy, but we’re making strategic shifts toward AI and that means refocusing our talent and resources.” It would have been just as painful to the people losing their jobs, but at least it would have been honest. It would have felt as though the company respected those employees enough to tell the truth. People may not like it—but they would at least understand it.
Instead, what we got was a kind of corporate sleight of hand that tries to make layoffs feel like a success story. But layoffs are obviously not a success story. Talking about them this way says that no matter how much success you generate, or how loyal you are to the mission, you’re expendable when the next big thing comes along.
Credits: TCA, LLC.