The rumors that Xbox will lay off thousands of employees in January is not true, according to Microsoft's CCO. It's been a wild couple of years for the tech giant, which has become the world's biggest games publisher but has also struggled to compete in the hardware space and has become notorious for cancellations and layoffs. For now, though, it looks like the Xbox will be spared another massive cut.
In the summer of 2025, Microsoft laid off thousands of employees worldwide, which equates to roughly 4% of its workforce. That round of cuts saw many games canceled and several studios close their doors for good in the biggest mass firing at the company since 2023. In recent years, widespread layoffs have become an unfortunate trend at Microsoft, so many didn't question recent rumors that another round of corporate downsizing was on the way. But these predictions may not have been correct this time.
Fable 2026 is not out of the woods after Microsoft's layoffs and layoffs
Xbox's recent “restructuring” directly led to the cancellation of many games, but it hasn't led to anything for other projects like Fable.
Microsoft CCO Says Xbox Layoff Rumors '100 Percent Made Up'
When news of layoffs caused by rising AI costs began to circulate, Microsoft CCO Frank X. Shaw responded to such a claim on X, saying the rumor was fabricated. The response came after noted insider Jez Corden also denied the theory, at least as far as Xbox is concerned. It's unclear if Shaw is also just talking about Xbox, as the original rumor said the layoffs would be spread across the gaming segment, Azure Cloud and sales teams, but his firm tone seems to indicate that the entire report is false. Sill, it's easy to see where the rumors might come from, as Xbox replaced hundreds of laid-off workers with AI in 2025, and the company has been pushing the technology hard lately.
On the other hand, there's also reason to believe that Xbox can handle rising AI costs without another round of layoffs. After the infamous 2025 cuts, Microsoft CEO Satya Nadella said the company was “thriving” with its current and projected financials looking strong. In the tech giant's latest financial results, it said 2025 “was a year of record performance”, with total profit rising 17% to $128.5 billion. Of course, it's worth noting that Microsoft's operating income also grew by a double-digit percentage in 2024, and those billions in profits didn't stop the company from laying off employees, so performance isn't always a direct indicator of employment trends.
Even if Xbox isn't hit with a round of layoffs in January, the company's enthusiasm for AI is undeniable. Nadella has previously expressed hopes that Microsoft could use AI to generate entire games, and the use of generative AI has already appeared in major franchises such as Call of Duty and Halo. Whether this increasing AI use will lead to cuts is uncertain at this time, but it remains controversial among players and industry insiders alike. Some advocate it as a way to save time and resources for developers, while others express fears that it could affect jobs or lead to copyright issues for smaller artists.
While Microsoft may not be cutting jobs this month as some have feared, layoffs have become a worrying trend across the industry. In October 2025, Amazon cut over 14,000 jobs, many of which came from the company's gaming segment. Funcom, Crystal Dynamics, and EA all received layoffs in 2025 as well. It's an unusual time for video games, with games more popular than ever, while many studios, big and small, are grappling with financial challenges amid rising development costs and a competitive market. Only time will tell how it goes from here.
