Microsoft has confirmed it intends to make 10,000 layoffs by the end of Q3, FY23. The news comes with the Xbox maker pursuing a mammoth $68.7 billion acquisition of Activision Blizzard.

Microsoft said the job cuts are signed to align its cost structure with its revenue targets and "where we see customer demand."

Addressing employees in a communication shared on the Microsoft blog, CEO Satya Nadella said the layoffs represent less than 5 percent of Microsoft's total employee base, and suggested the company must "exercise caution" as the world undergoes significant changes.

"We’re living through times of significant change, and as I meet with customers and partners, a few things are clear. First, as we saw customers accelerate their digital spend during the pandemic, we’re now seeing them optimize their digital spend to do more with less," wrote Nadella.

"We’re also seeing organizations in every industry and geography exercise caution as some parts of the world are in a recession and other parts are anticipating one. At the same time, the next major wave of computing is being born with advances in AI, as we’re turning the world’s most advanced models into a new computing platform.

"This is the context in which we as a company must strive to deliver results on an ongoing basis, while investing in our long-term opportunity."

Nadella noted the company will continue to hire in key strategic areas, but added that some other roles will be eliminated. The company didn't specify which business areas will be affected by the layoffs, so it's currently unclear if staff within Microsoft's video game division will be hit by the wave of job cuts.

The Microsoft CEO described the layoffs as the kind of "hard choice" the company has made throughout its history in order to remain relevant, and said the tech firm will continue to invest in strategic areas.

Nadella added that those affected by the layoffs will have the company's full support, and said staff eligible for U.S. benefits will receive above-market severance pay, continued healthcare coverage for six months, stock awards for six months, career transition services, and 60 days' notice prior to termination.

"When I think about this moment in time, the start of 2023, it’s showtime—for our industry and for Microsoft. As a company, our success must be aligned to the world’s success," continued Nadella.

"That means every one of us and every team across the company must raise the bar and perform better than the competition to deliver meaningful innovation that customers, communities, and countries can truly benefit from. If we deliver on this, we will emerge stronger and thrive long into the future; it’s as simple as that."

Game Developer has reached out to Microsoft to clarify which divisions will be affected by the layoffs.

Update: Per Bloomberg's Jason Schreirer, the layoffs at Microsoft affect its games division, including Xbox and Bethesda. He later clarified there were layoffs at Bethesda Game Studios and 343 Industries. For 343, Schreirer added the Halo Infinite developer was hit hardest, and the studio had previously implemented a hiring freeze months prior.

Per Kotaku, developer The Coalition (Gears of War) also had its share of layoffs.