Amazon Layoffs Hit Game Studios as MMO Development Halts Amid AI Shift

Amazon’s latest wave of layoffs, which affects more than 14,000 corporate employees, has now reached its gaming division, Amazon Game Studios. According to reports from Bloomberg and The Verge, the cuts are not minor – they represent a major shift in Amazon’s gaming ambitions, particularly in the area of massively multiplayer online (MMO) titles.

Steve Boom, Amazon’s head of audio, Twitch, and games, confirmed that the company is halting a substantial portion of its first-party AAA game development efforts, saying that while Amazon is proud of its progress, it is now choosing to focus its resources elsewhere.

The move comes as a surprise to many, especially considering the investment Amazon had made in building a serious gaming division over the past few years. Titles like New World and Lost Ark had hinted that Amazon might finally be finding its footing in the competitive world of online gaming. However, the statement indicates that the company is stepping back from the MMO genre entirely – an area that had defined much of its creative focus. Major studios in Irvine and San Diego are reportedly seeing deep role reductions, alongside cuts in Amazon’s central publishing team.

Behind the decision lies a broader company-wide reorganization driven by artificial intelligence. Senior executive Beth Galetti wrote in a memo to staff that these reductions are meant to streamline operations and shift resources toward Amazon’s biggest priorities – which now include AI-driven innovation. Galetti described AI as the most transformative technology since the Internet, emphasizing that Amazon wants to be leaner and more adaptable in order to move faster and invest in its most promising areas. While the company continues to perform well financially, it believes that focusing on automation and efficiency will yield better long-term growth than spreading itself too thin.

For Amazon Game Studios, this could mark the end of a long and often turbulent chapter. The division has struggled to achieve consistent success since its founding, despite access to vast resources. While New World enjoyed initial popularity, sustaining a live-service MMO proved challenging. Industry observers note that Amazon’s retreat from large-scale online games may signal a pivot toward other entertainment avenues, such as television and film adaptations of popular game franchises. Its Fallout series has been a hit, and upcoming adaptations of Wolfenstein and Mass Effect suggest that Amazon may be leaning into transmedia storytelling rather than competing head-on in AAA gaming.

Still, some argue that Amazon is walking away from a massive opportunity. With its enormous infrastructure, cloud computing power, and services like Luna, the company could have created a new ecosystem that unified streaming, gaming, and digital entertainment. Analysts believe that if Amazon dedicated even a small percentage of its projected $60 billion net income toward game development – around 3%, or $2 billion annually – it could build or acquire major studios, rivaling giants like Ubisoft or CD Projekt. Such an investment could have positioned Amazon as one of the world’s dominant gaming publishers within a decade. Instead, for now, the company appears to be pressing pause on that dream – perhaps temporarily, perhaps permanently.