Epic Games announced on Tuesday that it is cutting more than 1,000 positions, with CEO Tim Sweeney citing a significant drop in revenue tied to declining player engagement with its flagship title. In a memo addressed to staff and posted publicly, Sweeney stated that the company has been spending considerably more than it earns, making major reductions necessary to keep the business viable. He also took the unusual step of clarifying that the cuts are not connected to artificial intelligence, acknowledging the topic’s prominence in industry discussions.
Fortnite, the battle royale shooter launched in 2017, had reportedly accumulated over 650 million registered players worldwide by 2025. Despite remaining one of the most widely played games globally, Sweeney acknowledged that the title has struggled to deliver consistent quality across every season. He also noted that the company is still in the early stages of re-entering the mobile market and optimizing the game for smartphones.
The layoffs form part of a wider cost-reduction effort. Beyond the workforce cuts, Epic says it has saved an additional $500 million by scaling back contractor use, reducing marketing expenditure, and leaving certain positions vacant. Sweeney drew comparisons to earlier turning points in the company’s history, including its transition from 2D to 3D games in the 1990s and its later move into online titles.
Sweeney described current market conditions as the most challenging the company has faced since those earlier periods, pointing to broad upheaval across the gaming industry. He also highlighted structural pressures affecting the sector more widely, including a current console generation that is selling fewer units than its predecessor and growing competition from other forms of digital entertainment for players’ attention. He expressed confidence that companies navigating these conditions successfully would emerge with significant opportunities.
The question of whether to incorporate generative AI into game development has divided the industry since the public launches of ChatGPT and Midjourney in 2022. Some figures have been openly critical: former Grand Theft Auto developer Dan Houser compared the technology to “mad cow disease” in December. Nevertheless, a report published by Google Cloud found that nine in ten game developers said they were already using AI agents in their work.
Epic itself has taken a permissive stance on generative AI. In 2023, the company clashed with Valve, creator of the Steam platform, after Epic chose to allow games developed using generative AI on its Epic Games Store marketplace. Major publishers including Electronic Arts, Square Enix, and Krafton have also publicly embraced AI in recent years, even as industry-wide layoffs have continued to rise.
Employees affected by the cuts will receive a minimum of four months of base pay, six months of company-paid healthcare for workers based in the United States, and accelerated stock-option vesting through January 2027. Looking ahead, Sweeney indicated that Epic intends to continue investing in its core technology, with plans to transition from Unreal Engine 5 and Unreal Editor for Fortnite to Unreal Engine 6 as part of its next development phase. Unreal Engine is used broadly across the gaming industry as well as in a wide range of entertainment productions.
Originally reported by Decrypt.
