Microsoft starts a new round of job cuts and the next phase of its Xbox 'reset.' Read the memo.

Microsoft began a new round of layoffs on Tuesday, affecting around 500 employees, primarily in its Xbox gaming division, and a small number of roles in other units like cloud + AI.

The latest cuts follow layoffs in July, when Microsoft said it would trim 2.1% of its global workforce, or about around 4,800 employees at the time.

The cuts are the latest step in Microsoft’s effort to slim down its gaming business after years of expansion and big acquisitions.

Xbox is working through a plan to eliminate roughly 20% of its workforce by the end of Microsoft’s fiscal year, while reorganizing studios and deciding which businesses it still wants to own.

The latest developments in Xbox’s “reset” include cutting 268 gaming roles, reorganizations of Xbox’s studio groups, and updates on its divestment plans. “The actions completed since July, inclusive of the studio divestitures, bring us roughly three-quarters of the way through previously announced restructuring,” Xbox executive Matt Booty wrote in a memo about the reset.

Microsoft’s severance package in July offered laid-off US employees up to 39 weeks’ base pay for most US employees with a minimum of 60 days plus additional time based on seniority and tenure, according to documents reviewed by Business Insider.

Team, I’m writing to share several updates as part of the XBOX reset outlined earlier this year.

First, we are eliminating 268 roles across Halo Studios, other first-party studios, and the XGS management and central functions layer.

The actions completed since July, inclusive of the studio divestitures, bring us roughly three-quarters of the way through previously announced restructuring.

I am deeply grateful for what our colleagues have built, and I know how difficult today will be for those leaving and the teams around them.

Second, we are reorganizing our studios.

The goal is to strengthen our franchises and games by operating fewer business units, aligning groups that already work closely together, and focusing our publishing expertise.

Third, an update on our studio divestitures: In August, Compulsion and Double Fine returned to management with their IP, back catalogs, and runway funding.

Undead Labs has now successfully transitioned on similar terms and, with a new publisher, will release State of Decay 3 day one on Game Pass.

Unfortunately, two separate agreements for Ninja Theory fell through.

We will now begin consultation with employees on a proposed closure while continuing to explore other paths forward.

Consultation with Arkane remains underway and is expected to continue through the end of the year.

Today, our focus should be on supporting those affected and treating one another with care and respect.

I will spend time with our studios over the next week.

At our October 6 town hall, we will come together as an ALL-XBOX team to reflect on our progress and look ahead to one of the strongest game lineups in our history.

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