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Concerns Raised Over Microsoft’s Gaming Division Restructuring

Published July 6, 2026 at 2:55 PM UTC

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Employees and industry observers have expressed apprehension following Microsoft’s decision to lay off thousands and restructure its gaming division. The move raises questions about Microsoft’s dedication to supporting diverse gaming projects and its ability to compete effectively in the gaming market. The withdrawal of funding from IO Interactive’s RPG Project Fantasy and the lack of clear communication regarding affected studios have fueled uncertainty and lowered morale among developers. Experts suggest that balancing AI investments with gaming development is challenging, and Microsoft’s current approach may risk alienating its gaming community while trying to keep pace with AI-driven industry shifts.