Epic Games has announced sweeping layoffs of more than 1,000 employees. “The downturn in Fortnite engagement that started in 2025 means we're spending significantly more than we're making, and we have to make major cuts to keep the company funded,” CEO Tim Sweeney said in a memo to workers on Tuesday.

Sweeney wrote that, combined with “over $500 million of identified cost savings in contracting, marketing, and closing some open roles,” the layoffs will give Epic more stability. He added that the layoffs are not related to AI.

Back in 2023, Epic laid off 830 employees. At the time, that was 16 percent of its workforce, suggesting around 4,000 employees remained at the company. If those numbers haven’t changed too much in the meantime, that means Epic is culling around a quarter of its headcount this week.

Along with a dip in Fortnite engagement, Sweeney pointed out that Epic isn’t immune from systemic issues the games industry is contending with, such as a slowdown in growth, reduced spending, “tougher cost economics” and a battle with other types of media for consumer’s attention.

However, Epic has some issues of its own to deal with. “Despite Fortnite remaining one of the most successful games in the world, we’ve had challenges delivering consistent Fortnite magic with every season; we're only in the early stages of returning to mobile and optimizing Fortnite for the world's billions of smartphones; and in being the industry's vanguard we have taken a lot of bullets in a battle which is only in the early days of paying off for ourselves and all developers,” Sweeney wrote. (He previously said Epic spent over $100 million in legal fees alone on its App Store battle with Apple.)

The path forward for the company, per its CEO, is to create “awesome Fortnite experiences with fresh seasonal content, gameplay, story and live events,” perhaps in an attempt to recapture some of that “magic” he’s referring to. Speeding up work on developer tools amid the transition to Unreal Engine 6 is important as well, Sweeney indicated.

He said that the workers Epic is laying off will receive at least four months of their base pay, though they’ll get more depending on the length of their tenure at the company. Epic will pay for extended healthcare coverage, including for six months for affected workers in the US. The company — which is not publicly traded — will speed up the vesting of stock options through next January and “extend equity exercise options for up to two years,” Sweeney said.

Epic announced the layoffs days after it increased the price of Fortnite’s V-bucks currency. “The cost of running Fortnite has gone up a lot and we’re raising prices to help pay the bills,” it said.

As part of the changes at the company, Epic is killing off three Fortnite modes. Rocket Racing (which was built by Rocket League developer Psyonix) will shut down in October. Fortnite Ballistic — a 5v5 tactical shooter mode — and Festival Battle Stage, which is a competitive version of the Fortnite Festival rhythm game, will vanish on April 16. “We've built a lot of Fortnite modes, and in some cases we failed to build something awesome enough to attract and retain a large player base,” Epic said on X.

The company noted in its Year in Review recap last month that although the hours that players spent in third-party titles on the Epic Games Store increased by four percent in 2025, “overall gameplay hours declined year over year,” hinting at a dip in Fortnite numbers. The company said PC players spent $1.16 billion on the store in 2025, an increase of six percent from the previous year. Of that, $400 million was spent on third-party PC games. However, Epic Games Store vice president and general manager Steve Allison told Polygon in February that, factoring in first-party revenue and the 12 percent cut the company takes from third-party games, “the store is already — even with all this stuff — marginally profitable now."

Here is the full memo Sweeney shared with Epic’s employees on Tuesday:

Today we’re laying off over 1000 Epic employees. I'm sorry we're here again. The downturn in Fortnite engagement that started in 2025 means we're spending significantly more than we're making, and we have to make major cuts to keep the company funded. This layoff, together with over $500 million of identified cost savings in contracting, marketing, and closing some open roles puts us in a more stable place.

Some of the challenges we're facing are industry-wide challenges: slower growth, weaker spending, and tougher cost economics; current consoles selling less than last generation's; and games competing for time against other increasingly-engaging forms of entertainment.

And some of our challenges are unique to Epic. Despite Fortnite remaining one of the most successful games in the world, we’ve had challenges delivering consistent Fortnite magic with every season; we're only in the early stages of returning to mobile and optimizing Fortnite for the world's billions of smartphones; and in being the industry's vanguard we have taken a lot of bullets in a battle which is only in the early days of paying off for ourselves and all developers.

Since it's a thing now, I should note that the layoffs aren't related to AI. To the extent it improves productivity, we want to have as many awesome developers developing great content and tech as we can.

What we now need to do is clear: build awesome Fortnite experiences with fresh seasonal content, gameplay, story, and live events; accelerate developer tools with greater stability and capability as we evolve from Unreal Engine 5 and UEFN to Unreal Engine 6. And we'll be kicking off the next generation of Epic with huge launch plans towards the end of the year.

This isn't our first time being here. Epic survived upheavals in 1990's with the move from 2D to 3D with Unreal 1; in the 2000's building console games with Gears of War; and in 2012 moving to online gaming with Paragon and Fortnite. Each time, we rebuilt our foundations and earned a renewed leadership position.

Market conditions today are the most extreme we've seen since those early days, with massive upheaval in the industry accompanied by massive opportunity for the companies that come out as winners on the other side. That's what we're aiming 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.

At Epic, we pride ourselves in only hiring the industry's best, so it is very painful to part with so many talented people. The folks impacted by the layoffs will receive a severance package that includes at least four months of base pay, with more based on tenure. We’re also extending Epic-paid healthcare coverage.

For example, in the U.S., they’ll receive paid coverage for 6 months. We’ll also accelerate their stock options vesting through January 2027 and extend equity exercise options for up to two years.

We'll have a company meeting Thursday to talk about the roadmap in more detail.

-Tim