‘Fortnite’ Maker Epic Games Reveals Mass Layoffs, Says AI Isn’t to Blame

Epic Games announced on Tuesday that it would lay off more than 1,000 employees, and CEO Tim Sweeney addressed the technological elephant in the room: artificial intelligence.

“Since it’s a thing now, I should note that the layoffs are not related to AI,” Sweeney wrote in a memo to staff which was also posted publicly. “As far as improving productivity, we want to have as many great developers developing great content and technology as possible.”

The popular battle royale shooter Fortnite, launched in 2017, was reportedly over 650 million registered players worldwide in 2025. In the memo, however, Sweeney said that a decline in Fortnite engagement that started in 2025 caused Epic to spend “significantly more than we earn,” forcing the company to make major cuts to keep the business afloat.

While Sweeney didn’t elaborate on the reason for mentioning AI, one reason could lie in the company’s embrace of the technology. In 2023, Epic Games clashed with Valve, the maker of Steam, over the use of generative AI in games, with the Fortnite maker allowing games developed using the technology onto its Epic Games Store marketplace.

The company said the layoffs are part of a broader cost-cutting effort that will save more than $500 million in additional savings by cutting contracts, cutting marketing spend and leaving some positions unfilled. Sweeney compared the moment to previous moments in the company’s history, including the shift from 2D to 3D games in the 1990s and later the move to online titles like Fortnite.

“Current market conditions are the most extreme we have seen since those early days, with enormous turmoil in the industry, coupled with enormous opportunity for the companies that emerge as winners on the other side,” Sweeney wrote. “That’s what we want to do for our players, and we aim to bring other like-minded developers in the industry along on the journey to build an increasingly open and vibrant future of entertainment together.”

Sweeney also noted that the current console generation is selling fewer units than its predecessor, and that games are increasingly competing with other digital entertainment for players’ time.

Since the public launch of ChatGPT and Midjourney in 2022, the gaming industry has struggled with the decision of whether or not to incorporate generative AI into game development. Some creators expressed hostile views: In December, former Grand Theft Auto developer Dan Houser compared the technology to “mad cow disease.”

Despite public opposition to the use of AI in gaming, a report published last year by Google Cloud said nine in 10 game developers said they were already using AI agents in their work. Major game publishers like Electronic Arts, Square Enix and Krafton have publicly embraced AI in recent years as layoffs in the industry have increased.

However, some challenges are specific to Epic Games, Sweeney noted.

“Despite Fortnite remaining one of the most successful games in the world, we’ve had challenges each season delivering consistent Fortnite magic; we’re only in the early stages of returning to mobile and optimizing Fortnite for the world’s billions of smartphones,” he wrote.

Affected employees will receive at least four months of base salary, six months of company-paid health care for U.S. employees and accelerated stock option awards through January 2027, according to Epic.

Despite the layoffs, Epic plans to continue investing in its technology, with Sweeney noting that the company is preparing to transition from Unreal Engine 5 and Unreal Editor for Fortnite to Unreal Engine 6 as part of the next phase. Unreal Engine is widely used not only in the gaming industry, but also in all kinds of entertainment projects.

“Being at the forefront of the industry, we have taken a lot of bullets in a battle that is still in its early days and is paying off for ourselves and all developers,” said Sweeney.

Epic Games did not immediately respond Declutter request for comment.