Fortnite engagement drops sharply, and Epic just made a brutal decision affecting over 1,000 workers

Epic Games has laid off over 1,000 employees, a move CEO Tim Sweeney attributes to a significant “downturn in Fortnite engagement” that left the company spending more than it was earning. As detailed by GamesIndustry.biz, Sweeney told staff the cuts are necessary “to keep the company funded” and get it “in a more stable place.”

Sweeney noted that the layoffs, combined with over $500 million in cost savings from contracting, marketing reductions, and unfilled roles, should help stabilize Epic’s finances. He was also explicit that the cuts “aren’t related to AI,” pointing instead to broader industry headwinds including slower growth, weaker consumer spending, higher operating costs, and current-gen consoles underperforming compared to the previous generation. Sweeney described present market conditions as “the most extreme we’ve seen since [the] early days.”

For those affected, Epic is offering a severance package that includes at least four months of base pay, with additional compensation based on tenure. US employees will receive six months of Epic-paid healthcare coverage, stock options accelerated through January 2027, and equity exercise options extended for up to two years.

This isn’t the first time Epic has been forced into major cuts

Epic laid off over 800 people in September 2023, roughly 16% of its entire workforce at the time, with about two-thirds of those cuts falling on teams outside core development. Even then, the company had already moved to net-zero hiring and scaled back spending on marketing and events, but it “still ended up far short of financial sustainability.”

That round also affected the Fall Guys studio Mediatonic and resulted in the sale of music storefront Bandcamp, with 250 employees impacted in that transaction. The gaming sector has seen broader workforce pressure throughout this period, amid a spike in industry layoffs that hit a 17-year high earlier this year.

In a move that now makes more sense given the financial picture, Epic recently raised its in-game currency prices, stating it was “to help pay the bills” because the “cost of running Fortnite has gone up a lot.” Higher operating costs across the gaming industry have been compounded by rising RAM prices driven by AI infrastructure demand, a factor squeezing hardware and software budgets across the sector.

The company is set to hold a meeting this Thursday to discuss its roadmap in more detail. Sweeney acknowledged that Epic prides itself on hiring the best, making it “very painful to part with so many talented people,” and noted that if AI improves productivity, the goal remains to have as many developers as possible building content and technology.