The gaming industry’s layoff streak continues. Epic Games CEO Tim Sweeney announced today that the company is cutting over 1,000 employees, citing a downturn in Fortnite engagement that started in 2025 and a widening gap between spending and revenue. The layoffs are accompanied by over $500 million in additional cost savings from contracting, marketing, and closing open roles.
Sweeney pointed to a mix of industry-wide and Epic-specific challenges. On the broader front, he cited slower growth, weaker player spending, current-gen consoles selling less than the previous generation, and games increasingly competing for attention against other forms of entertainment. On Epic’s side, Sweeney acknowledged that the studio has struggled to deliver consistent magic with every Fortnite season, is still in the early stages of returning to mobile, and has absorbed significant costs fighting for a more open app marketplace, a battle he says is only beginning to pay off.
In a notable aside, Sweeney addressed AI directly, stating that the layoffs have nothing to do with it. “To the extent it improves productivity, we want to have as many awesome developers developing great content and tech as we can,” he wrote.
Looking ahead, Sweeney outlined the company’s priorities: building stronger Fortnite experiences with fresh seasonal content and live events, accelerating developer tools as Unreal Engine evolves from version 5 to 6, and launching what he described as “the next generation of Epic” toward the end of the year. Sweeney compared the current moment to previous upheavals the company survived, including the transition from 2D to 3D in the 1990s, building console games with Gears of War in the 2000s, and moving to online gaming with Fortnite. He described current market conditions as the most extreme since those early days.
Affected employees will receive at least four months of base pay with additional severance based on tenure, extended healthcare coverage (six months of paid coverage in the U.S.), accelerated stock option vesting through January 2027, and extended equity exercise options for up to two years.
This isn’t Epic’s first round of significant cuts. The company laid off around 830 employees in September 2023. It’s also far from the only major studio making these kinds of moves, as layoffs have become a recurring reality across the gaming industry over the past few years. It’s a frustrating pattern, and it’s always the people doing the actual work who pay the price.
It’s been interesting to see how these major developers and huge companies with thousands of employees are finding the gaming industry a struggle, when Steam recently hit a new all-time concurrent users record with over 42.3 million. It really does seem like some of these companies refuse to acknowledge that smaller and cheaper indie titles, like Slay the Spire 2 (which still had a concurrent peak player count of over 421,000 in the last 24 hours), are what players are gravitating toward. It’s not so much that games are increasingly competing for attention against other forms of entertainment, and it’s more that there are better and cheaper games competing for attention against more expensive games that can’t find ways to innovate.
