Square Enix dropped another round of bad news on its Western workforce this week, announcing layoffs that could impact more than 100 employees across the United States and United Kingdom. The company behind Final Fantasy, Dragon Quest, and Kingdom Hearts confirmed the cuts as part of what it’s calling an “overseas structural reform” aimed at consolidating development functions back in Japan.
The Numbers Behind the Cuts
According to internal sources and employee posts on social media, up to 137 jobs are at risk in the London office alone. The figure could change due to UK employment laws requiring consultation periods before finalizing redundancies. In the US, the exact number remains unclear, but dismissals were expected to continue through the end of the week after the initial announcement on Thursday, November 6.
The layoffs hit nearly all areas of the business, including IT, marketing, publishing, sales, quality assurance, and business planning teams. Square Enix Europe’s entire Collective division, external studios development team, brand marketing group, and Japanese communication support staff were reportedly told they’re at risk. This isn’t just trimming around the edges – it’s a fundamental reshaping of how Square Enix operates outside Japan.
Why This Is Happening Now
During an all-hands video call with staff, Square Enix president Takashi Kiryu explained the company is implementing changes to create a more “lean” and “agile” business abroad. The restructuring is expected to save the company over 3 billion yen, which translates to roughly $19.6 million annually. The HD Games publishing division is being condensed from 11 divisions down to just four as part of this efficiency drive.
But here’s the kicker – this is the second consecutive year Square Enix has cut jobs in its American and European operations. According to someone who was on Thursday’s call, Kiryu admitted that last year’s overseas restructuring hadn’t worked as intended. That’s a sobering admission for anyone who survived the 2024 layoffs only to face the chopping block again in 2025.
The Japan-First Strategy
Square Enix has been steadily pulling back from Western game development for years. The company sold Crystal Dynamics, Eidos-Montreal, and Square Enix Montreal to Embracer Group back in 2022, along with major IPs like Tomb Raider. What remains of its Western portfolio includes Life Is Strange, Outriders, Just Cause, and publishing duties for games like PowerWash Simulator.
The strategy is now crystal clear: develop games in Japan, and use Western offices primarily for localized marketing and distribution. An internal slide presentation shared with employees stated the goal of “closing overseas development studios and shifting toward consolidating development functions in Japan.” For a company that once had thriving studios across multiple continents, it’s a dramatic retreat.
The AI Factor
The timing of these layoffs is particularly notable because they were announced on the same day Square Enix revealed plans to have artificial intelligence handle 70 percent of its quality assurance and debugging work by the end of 2027. The company is partnering with an AI research lab at the University of Tokyo to “improve the efficiency of game development processes.”
It doesn’t take a genius to connect the dots. If you’re planning to automate most of your QA work within two years, you’re not going to need as many QA workers. Square Enix has previously stated it intends to be “aggressive in applying AI” across both development and publishing operations. For employees whose jobs involve testing games for bugs and issues, the writing is on the wall.
Financial Performance Context
These cuts aren’t happening in a vacuum. Square Enix reported revenues of 133.895 billion yen (about $875 million) for the first half of fiscal year 2025, representing a 15 percent decline compared to the previous year. Net income also dropped by 14.5 percent to 10.05 billion yen (approximately $66 million). When a company’s revenues are sliding and leadership is feeling pressure from investors, cost-cutting measures inevitably follow.
The company also took an 11.8 billion yen restructuring expense related to reviewing development titles and development structures in overseas operations. That’s a significant hit to the balance sheet, but management clearly believes it’s necessary for long-term positioning.
What Employees Are Saying
Several laid-off employees confirmed the news on social media, with community management team members being particularly visible in their departures. One former employee in Europe mentioned that the atmosphere in the London office had been tense for weeks leading up to the announcement. The consultation period required by UK law means some affected workers face weeks of uncertainty before knowing their final status.
Square Enix released a statement attempting to soften the blow: “This was an extremely difficult decision, made following careful consideration and analysis by our leadership, in order to best position the Group’s long-term growth. We extend our heartfelt gratitude to the talented team members who will be departing the company for their significant contributions.”
What This Means for Future Games
With development consolidating in Japan and Western offices shrinking, expect Square Enix’s output to skew even more heavily toward Japanese-developed titles. Projects like Final Fantasy VII Remake Part 3, Kingdom Hearts 4, and Dragon Quest remakes are all being developed in Japan. Western-facing franchises that don’t have established Japanese development teams may find themselves in limbo or quietly shelved.
The reduction in Western marketing and publishing staff could also affect how Square Enix games are promoted and supported in English-speaking markets. Smaller teams mean fewer resources for community management, localization quality control, and region-specific promotional campaigns.
FAQs
How many employees are being laid off at Square Enix?
Square Enix has not disclosed an exact total, but reports indicate up to 137 jobs are at risk in the UK alone, with an unknown number of positions being eliminated in the US.
Which Square Enix offices are affected by the layoffs?
The layoffs are primarily affecting Square Enix’s US and UK offices. Development operations in Japan are not impacted by these cuts.
Why is Square Enix laying off employees?
The company is restructuring its overseas operations to consolidate development in Japan, reduce costs by $19.6 million annually, and shift toward AI-driven quality assurance processes.
What departments at Square Enix are being cut?
Nearly all areas are affected, including IT, marketing, publishing, sales, quality assurance, business planning, and community management teams.
Is this the first time Square Enix has laid off Western employees?
No, Square Enix also conducted layoffs across its American and European operations in 2024. The company has been gradually reducing its Western presence for several years.
How will AI replace Square Enix employees?
Square Enix plans to have artificial intelligence handle 70 percent of its quality assurance and debugging work by the end of 2027, potentially reducing the need for human QA testers.
Will this affect upcoming Square Enix games?
The restructuring focuses on consolidating development in Japan, so Japanese-developed titles like Final Fantasy and Dragon Quest games should continue as planned. Western-focused franchises may face uncertainty.
What studios does Square Enix still own outside Japan?
After selling major Western studios to Embracer Group, Square Enix retains control of franchises like Life Is Strange, Outriders, and Just Cause, though development may be handled differently going forward.
Conclusion
Square Enix’s latest round of layoffs represents more than just another cost-cutting exercise. It’s a clear statement about the company’s future direction: Japanese development, AI-assisted production, and minimal Western operations. For the employees losing their jobs, it’s a painful reminder that even iconic game companies are willing to sacrifice talent in pursuit of efficiency and shareholder value. Whether this strategy actually positions Square Enix for long-term growth remains to be seen, but for now, over 100 people are paying the price for management’s vision of a leaner, more Japan-centric future.