Xbox, Bethesda and 343 Industries affected by mass layoffs at Microsoft

Nadella explained that the layoffs represent less than 5% of the company's total workforce and the company will support the employees who will lose their jobs while also investing in "secular growth and long-term competitiveness".

Nadella explains that consumers have "[optimized] their digital spend to do more with less," which in turn necessitates the alignment of the company's costs and revenue with consumer spending. However, Microsoft still plans to hire employees "in key strategic areas."

343 Industries has its hands full working on Halo Infinite. The sci-fi shooter has been suffering delays in the launch of key features that the studio has promised to implement. The player base of Halo has dwindled as a result of the delays.

On the other hand, Bethesda is also working hard to releaseits biggest IP in Starfield. The space exploration RPG is slated for a first-half release. However, new rumors suggest that the game may be delayed by another one or two months toward the end of summer.

The Coalition is reportedly working on a number of unannounced projects. The studio may be developing the next entry to the Gears of War series.

It's unclear if the layoffs will have an impact on the development of games at the studios. Microsoft has touted this year as huge for Xbox with several big releases on the horizon. Redfall, Starfield, and Forza Motorsport are the biggest Microsoft-exclusive titles slated for release within the year.

The layoffs will cast a dark shadow overnext week's Developer_Direct live event. The showcase will highlight some of the titles that are coming this year, some of which will be made by developers that are part of the planned layoffs.

In the midst of all this, Microsoft is fighting an uphill battle with regulators over its Activision Blizzard purchase. The $68.7 billion deal is facing opposition from the US Federal Trade Commission and the EU Commission. The FTC has sued the tech giant over the deal while the EU Commission has moved to send a charge sheet to the software maker.