Microsoft Corp's MSFT latest round of gaming layoffs has impacted key teams at Activision Blizzard, with those behind Call of Duty: Warzone Mobile and Warcraft Rumble bearing the brunt.

These layoffs, numbering 650, follow an earlier cut of 1,900 employees this year, bringing the total to 2,550 since Microsoft's $69 billion acquisition of the gaming giant.

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While Xbox head Phil Spencer assured employees that no games were canceled or studios closed, reports indicate the teams working on Activision Blizzard's mobile titles have been affected. According to Game File, both Call of Duty: Warzone Mobile and Warcraft Rumble development teams saw significant cuts.

Mobile Gaming Troubles At Activision Blizzard

Released in March 2024, Call of Duty: Warzone Mobile was touted as a mobile extension of the successful Warzone franchise, with features like battle royale gameplay for up to 120 players and cross-progression with console and PC versions of Warzone, Modern Warfare 2 and the upcoming Black Ops 6.

Despite these innovations, the mobile title has not met the company's high expectations. Game File's Stephen Totilo pointed out that Warzone Mobile "didn’t hit as big as hoped," leading to a reduction in the game's team size, though the title will remain online.

This is a notable development considering the success of Call of Duty Mobile, developed by Tencent Holdings ADR‘s TCEHY TiMi Studio Group, which garnered over 650 million downloads since its launch.

With Warzone Mobile being developed in-house at Activision, the company aimed for greater financial returns, as it wouldn't have to share revenue with Tencent. However, the results suggest that the game's potential in the competitive mobile shooter market has fallen short.

Warcraft Rumble Team Also Impacted

Similarly, Warcraft Rumble, a free-to-play mobile tower defense game, launched in 2023 with initial success. But, according to internal reports, interest in the game has waned, pushing it into a quieter post-launch live operations phase. The layoffs have hit the game's team, reflecting the shifting priorities as Microsoft recalibrates its mobile gaming focus under Activision Blizzard.

In a memo sent to employees, Spencer hinted at these changes without directly naming the titles, saying, "there are some impacts to other teams as they adapt to shifting priorities and manage the lifecycle and performance of games."

Microsoft's acquisition of Activision Blizzard was in part motivated by its ambitions in the mobile gaming market, particularly through Activision's ownership of King, the developer behind Candy Crush. However, the recent struggles of both Warzone Mobile and Warcraft Rumble call into question the company's mobile-first strategy.

What's Next For Microsoft?

The company is set to launch Call of Duty: Black Ops 6 this October, which will be the first mainline Call of Duty title available on Game Pass from day one.

In addition, there are heavy rumors of an Xbox handheld console in development, and plans for next-generation Xbox consoles are already in motion. The company's next big release, Indiana Jones and the Great Circle, is scheduled for PC and Xbox this December, with a PlayStation 5 release to follow shortly after.

While layoffs are never easy, especially for those affected, Microsoft's overall gaming business remains robust. In the last quarter, gaming content sales surged, largely due to the integration of Activision Blizzard's titles, helping offset declining hardware sales.

The latest financial report revealed a 44% year-over-year increase in gaming revenue, with a 61% rise in content and services revenue, both driven by the addition of Activision Blizzard's portfolio.

The pressure is now on Microsoft to prove that its lofty $69 billion investment can deliver sustained growth, particularly as it grapples with challenges in the mobile sector.

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