Epic Games has announced a major round of layoffs, cutting more than 1,000 roles as it grapples with falling engagement in its flagship title Fortnite and broader industry pressures.

In a memo to staff, CEO Tim Sweeney said a downturn in Fortnite activity that began in 2025 left the company “spending significantly more than we’re making,” forcing “major cuts to keep the company funded.”

The layoffs, alongside more than US$500 million (A$760 million) in cost reductions across marketing, contracting and unfilled roles, are aimed at stabilising the business.

The move marks Epic’s second significant workforce reduction in recent years, following 830 layoffs in 2023. Based on previous headcount estimates, the latest cuts could represent roughly a quarter of its remaining workforce.

“The layoffs aren’t related to AI,” said Sweeney (pictured), despite growing scrutiny of automation across the games sector.

Alongside declining Fortnite engagement, Epic pointed to wider industry challenges including slower growth, reduced consumer spending and increasing competition from other forms of digital entertainment. Console sales have also lagged compared to the previous generation.

The company is also scaling back parts of the Fortnite ecosystem. Three game modes will be shut down in the coming months after failing to attract and retain large player bases.

Epic recently increased the price of Fortnite’s in-game currency, V-Bucks, citing rising operating costs.

Despite the cuts, the company says it is doubling down on Fortnite’s future, with plans to revitalise seasonal content, gameplay and live events in an effort to recapture what Sweeney described as the game’s “magic”. It is also accelerating development of new tools as it transitions towards Unreal Engine 6.

Affected employees will receive at least four months’ pay, extended healthcare and accelerated stock vesting.