Report: Microsoft chose to lay off thousands in favor of AI investment

Microsoft's decision to continue investing in artificial intelligence has come at the cost of thousands of jobs, sources tell The Verge's Tom Warren.

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Microsoft is reportedly restructuring its business around AI. The company has conducted 15,000 layoffs and job eliminations in 2025 alone, with many workers being relocated within the company under new positions. The layoffs are affecting jobs of all types, from sales and marketing to management, as the company reportedly pushes AI tools on its workers.

Sources tell The Verge that Microsoft had a choice between spending on AI or cutting jobs, and it ultimately chose the latter. We've seen the effects of this decision ripple through all parts of Microsoft, including the Xbox games division, where multiple games were cancelled, workers laid off, and studios shut down.

The move comes at a time when video games companies are doubling-down on AI investment in the hopes of creating their own unique AI toolsets for game developers to use for game creation, and players to use for content creation.

Companies like Sony are working closely with AMD to make their own upscaling technology using AI supersampling, utilizing machine learning techniques that train models based on PlayStation game assets. The end goal is to create asset libraries that can be translated into upscalers like Sony's PlayStation Spectral Resolution, or to be fed into user-generated content creation.

For example, Electronic Arts has teased generative AI tools with chat prompts. Users interact with the AI and tell it what they want, and the AI will render and change up gameplay features in real time.

EA's proprietary tech is experimental and in concept phase, but it did show that EA is using AI to collect assets from its franchises with the hope of fueling these player-made creations. EA's CEO Andrew Wilson has confirmed the company has over 100 AI projects in development.

Microsoft's implementation of AI has been more significant, with its MUSE generative AI technology being used to create gameplay in real time, on-the-fly, without any coding or development tools needed.

MUSE generates the actual game based on player inputs from a controller. Just hook up a controller, and AI will render the game on screen based on your inputs.

MUSE represents a generational leap in this new technology, and Microsoft is also using real-world player data to train MUSE AI.

It remains unclear how AI will be used in-house at Microsoft, or how it will shape how people make and play video games.