Major Xbox Layoffs 2025: Microsoft Shuts Down The Initiative, Cancels Perfect Dark and Everwild

As reported by Windows Central, Microsoft has announced the closure of its high-profile Xbox studio, The Initiative, and the cancellation of several major projects, including the long-awaited Perfect Dark reboot and Rare’s Everwild. This move comes as part of a sweeping round of Xbox layoffs 2025 that will see approximately 9,100 employees—about 4% of Microsoft’s global workforce—lose their jobs, with the Xbox division among the hardest hit.

Xbox Layoffs 2025 and Other Projects Cancelled 

1. The Initiative: A Studio That Never Shipped a Game

Founded in 2018, The Initiative was envisioned as a “AAAA” studio, attracting industry veterans and aiming to deliver blockbuster experiences for Xbox. Its flagship project, a reboot of the classic stealth-action franchise Perfect Dark, was developed in partnership with Crystal Dynamics, the studio behind the Tomb Raider series. Despite years of anticipation and a gameplay reveal at the Xbox Games Showcase in 2024, Perfect Dark faced persistent development challenges, including leadership changes and multiple project restarts.

With the closure of The Initiative, Microsoft ends a seven-year experiment that, despite high expectations, never resulted in a shipped game. The partnership with Crystal Dynamics will also be dissolved, marking a significant shift in Microsoft’s approach to first-party game development.

2. Perfect Dark and Everwild Cancelled

The cancellation of Perfect Dark is accompanied by the end of development on Rare’s Everwild, a fantasy adventure that had been in the works since 2019. Everwild was touted as Rare’s next big IP following the success of Sea of Thieves but struggled to find a clear direction and was quietly delayed multiple times. Both titles had been showcased as part of Xbox’s future lineup, making their cancellation a major blow to fans and the Xbox portfolio.

In addition to these high-profile cancellations, Microsoft has also scrapped several unannounced projects, including a new MMORPG from ZeniMax Online Studios codenamed “Blackbird,” which was intended to succeed The Elder Scrolls Online.

3. Layoffs and Industry Impact

The layoffs are part of a broader effort by Microsoft to streamline operations and focus resources on its most successful and promising franchises. According to an internal memo from Xbox Game Studios head Matt Booty, the decision to close The Initiative and cancel multiple projects was made to “adjust priorities and focus resources to set up our teams for greater success within a changing industry landscape.”

Microsoft is working with affected employees to provide severance, career transition support, and, where possible, opportunities to apply for other roles within the company. The Initiative is the only studio confirmed for closure in this round, but other Xbox teams—including those at ZeniMax, King, and Rare—have also seen significant cuts.

Despite these setbacks, Microsoft maintains that its overall portfolio strategy remains unchanged, with more than 40 projects still in active development and a strong slate of games planned for late 2025 and beyond. Titles showcased at the recent Xbox Games Showcase, such as Clockwork Revolution and State of Decay 3, are reportedly unaffected by the cuts.

What’s Next for Xbox?

While Microsoft’s next-generation console hardware plans remain on track, the closure of The Initiative and the cancellation of anticipated games like Perfect Dark and Everwild raise questions about the company’s ability to deliver new, original IPs in a highly competitive market. The focus now shifts to Microsoft’s remaining studios and their capacity to deliver on the promise of innovative and engaging experiences for Xbox players worldwide.

For ongoing coverage of Microsoft layoffs, Xbox studio closures, and the future of Xbox gaming, stay tuned to msftnewsnow.com.