Microsoft Layoffs Hit Xbox Division: Perfect Dark, Everwild, and More Canceled

Microsoft is undergoing a major internal shakeup, laying off around 9,000 employees—roughly 4% of its global workforce—and axing several high-profile games under its Xbox Game Studios division.

Among the casualties are long-anticipated titles like Perfect Dark, Everwild, and a mysterious new MMORPG codenamed Blackbird from ZeniMax Online Studios. The changes come as part of a broader restructuring effort aimed at repositioning Microsoft’s gaming arm for “strategic growth.”

Major Cuts: Xbox Game Studios Projects Canceled

In a memo first obtained by Variety, Phil Spencer, CEO of Microsoft Gaming, explained the decision was made to align resources with long-term priorities.

“To position Gaming for enduring success… we will end or decrease work in certain areas and remove layers of management to increase agility,” Spencer wrote.

Matt Booty, head of Xbox Game Studios, confirmed the canceled titles in an internal email, also shared by Variety.

“We have made the decision to stop development of Perfect Dark and Everwild, as well as wind down several unannounced projects,” Booty wrote. “As part of this, we are closing one of our studios, The Initiative.”

Perfect Dark Reboot Shuts Down

Perhaps the most notable cancellation is the Perfect Dark reboot, which had been in development at The Initiative, a studio built from the ground up in 2018 to revive the beloved sci-fi espionage series. Gameplay footage for the title debuted just last year during the 2024 Xbox Games Showcase.

Now, The Initiative itself is being shuttered, ending hopes of a modern take on one of Xbox’s most iconic franchises.

Everwild Canceled After Development Struggles

Also canceled is Everwild, a mystical new IP from Rare, the legendary British developer behind Sea of Thieves, Banjo-Kazooie, and the original Perfect Dark.

According to Video Games Chronicle, internal issues and shifting creative direction plagued Everwild’s development for years. Originally revealed in 2019, the project reportedly underwent a full reboot in 2021 but never regained traction.

Insiders now say Rare is facing restructuring and additional layoffs following the cancellation.

Secret MMORPG “Blackbird” Quietly Shelved

A lesser-known but equally ambitious title, codenamed Blackbird, was also scrapped. The MMORPG from ZeniMax Online Studios—creators of Elder Scrolls Online—had been quietly in development since 2018 and was reportedly envisioned as a spiritual successor to ESO.

While few details have been confirmed publicly, Bloomberg’s Jason Schreier and Windows Central both reported that Blackbird was among the projects eliminated during the layoffs.

Industry Concerns Grow as Layoffs Mount

CNET’s David Lumb described the developments as a troubling signal for both the gaming workforce and Xbox’s future release calendar.

“The biggest losses are to the thousands of people now out of a job in a tumultuous industry,” Lumb wrote. “The cancellations of big games like Perfect Dark and Everwild raise concerns about whether titles teased at Xbox Showcases will ever see the light of day.”

According to Microsoft, all games shown at the June 2025 Xbox Games Showcase are still in active development.

A Broader Industry Trend

Microsoft’s gaming layoffs are just the latest in a series of cutbacks across the video game industry. Despite the medium’s popularity, 2024 and 2025 have been marred by widespread layoffs at major studios including EA, Ubisoft, and Riot Games, with thousands of developers impacted globally.

These cuts reflect not just market volatility but also mounting pressure on gaming companies to deliver fewer, bigger, and more successful titles while keeping operating costs lean.

What’s Next for Xbox?

As Microsoft trims its gaming portfolio and internal teams, the pressure is now on its remaining studios to deliver hits—and reassure fans that the next wave of Xbox exclusives will arrive as promised.

While Perfect Dark, Everwild, and Blackbird are officially shelved, Microsoft insists its top remaining projects remain on track. For now, though, gamers and developers alike are left navigating an uncertain and increasingly cautious industry landscape.