Epic Games announced layoffs affecting more than 1,000 employees, with CEO Tim Sweeney saying the cuts are a response to falling Fortnite engagement and tougher market conditions.

What Epic told staff

Sweeney told employees the company has been "spending significantly more than we’re making" since a downturn that began in 2025. He described the layoffs as part of a larger plan to reduce costs and keep the company funded.

The plan includes identified savings of over $500 million across contracting, marketing, and unfilled roles, alongside the workforce reductions.

Why this is happening

The company cited a mix of industry-wide pressures and internal challenges:

  • Slower overall growth in the games market and weaker consumer spending.
  • Lower console sales compared with the previous generation.
  • A decline in Fortnite engagement that started in 2025, making it harder to deliver consistent seasonal experiences.

Despite these problems, Epic noted Fortnite remains one of the most globally successful games, but recent seasons have not always hit the mark.

Sweeney also said Epic is still early in returning Fortnite to mobile and optimizing the game for smartphones. The company continues to invest in long-term projects such as Unreal Engine development.

On the role of AI, Sweeney was clear that the layoffs are not about replacing people with AI. He said, "To the extent it improves productivity, we want to have as many awesome developers developing great content and tech as we can."

Severance and support for affected staff

Epic outlined a standard severance package for impacted employees that includes:

  • At least four months of base pay.
  • Extended healthcare coverage.
  • Accelerated stock vesting through January 2027.

Additional US-specific details: healthcare coverage will continue for six months, and equity exercise options will be extended for up to two years.

Where Epic goes from here

Sweeney said Epic will focus on improving Fortnite through stronger seasonal content, gameplay updates, and live events. The company also plans to keep developing the next generation of Unreal Engine and its developer tools.

He mentioned big launch plans toward the end of the year as part of a broader push to stabilize and grow the business.

The announcement follows a recent increase in V-Bucks prices, which Epic said was intended to help cover costs.