• Epic Games announced it would cut over 1,000 employees, or about 20% of its workforce.
• CEO Tim Sweeney says the layoffs aren't AI-driven and that the company still needs software developers.
• He cited a 'downturn in Fortnite engagement' and said rising costs forced cuts.

Epic Games announced that it was laying off more than 1,000 employees, but the "Fortnite" maker's CEO says it's not because of AI.

Tim Sweeney said in a memo to employees shared online Tuesday that the cuts, affecting about 20% of its workforce, reflect industry-wide challenges, including slower growth, weaker spending, and tougher cost dynamics.

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

A growing number of employers have recently cited AI as a reason for making deep cuts to their head counts. Recent examples include Block and Atlassian.

Tuesday's cuts, which come two years after Epic struck a $1.5 billion licensing deal with Disney, are significant, said Joost van Dreunen, CEO of the game-analytics firm Aldora Intelligence and a professor at New York University's Stern School of Business.

"It's an acknowledgement of the change in the industry that's taking place, particularly among American publishers, when one of the most popular game makers is finding itself having to let go of 1,000 people," he said. "It suggests that we're witnessing the decline of American cultural dominance in the video games industry."

Though the global games industry grew revenue — roughly 4.5% last year, according to Aldora — most of that growth came from outside the US, said Van Dreunen. "The consumer gravity point is moving eastward," he said.

The game industry's workforce has been contracting in recent years following a pandemic-era boom. An estimated 5,300 jobs were cut last year, and 14,600 were axed in 2024, according to an online tally of termination announcements and news reports by Farhan Noor, a technical artist in California.

Epic last had layoffs in 2023, affecting 16% of its workforce. Those layoffs were a first for the company, which was founded in the 1990s. In his memo, Sweeney indicated that the latest cuts are a painful necessity.

"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," he wrote. "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."

• Companies are spending big on AI, but research shows most haven't seen measurable ROI.
• To offset those costs, employers can do layoffs — or trim line items like bonuses and stock awards.
• Workers can still make a case for a pay bump by emphasizing their value and AI chops.

AI may be putting more than just jobs on the line.

Companies are investing heavily in the technology and top-tier AI talent, and layoffs aren't the only option for offsetting those costs. At least one survey of US business leaders suggests that some are planning to cut workers' compensation.

"They have to pay for AI somehow," said Rocki-Lee DeWitt, a management professor at the University of Vermont's Grossman School of Business. "It ain't cheap."

Research firm IDC says companies with more than 1,000 employees are expected to spend an average of $13.7 million on AI hardware, cloud infrastructure, software, and services this year, a 78% increase from 2025, based on a global analysis.

Nvidia CEO Jensen Huang said on a recent episode of the "All-In Podcast" that he would be "deeply alarmed" if one of the chip giant's top engineers spent too little on AI tokens. In another episode of the same program, venture capitalist Chamath Palihapitiya expressed concern about ballooning AI bills at his startup.

Yet despite all that outlay, 95% of organizations reported no measurable ROI from AI in the first half of 2025, according to an MIT study based on reviews of publicly disclosed AI initiatives and executive interviews.

Until companies see tangible gains from their AI investments, they may need to rein in other expenses, especially as tariffs, high inflation, and other factors also strain budgets.

Cost-cutting options

Several companies have announced layoffs tied to AI in recent months — including Block and Atlassian — and others may be tempted to follow suit, Business Insider previously reported. In November, HP said in an earnings report that it planned to cut between 4,000 and 6,000 jobs by the end of 2028, saving the company roughly $1 billion.

Cuts to employee compensation may be next.

More than half of 866 executives and senior managers polled earlier this month by ResumeBuilder.com, 58%, said they plan to reduce employee compensation by the end of this year to help fund their AI investments. Bonuses and stock awards will be affected the most, followed by raises, benefits, and base salaries, the findings show.

Though such cuts could hurt morale, "employees don't have any leverage" due to the tight job market, said Jessica Kriegel, chief strategy officer at workplace consulting firm Culture Partners in Sacramento, California. "They will push back less, and they will accept smaller raises to avoid risk that feels real."

ResumeBuilder didn't cite the size of the companies where the respondents work, though small businesses are the most likely to take a hammer to employee pay or perks in lieu of making job cuts, said Kriegel.

"You can't just lay off 10% of your organization when you have, say 20 people, and everyone has got their hands in a million different pots," she said.

Another option for companies grappling with AI and other costs can be to hold compensation steady. The Conference Board, a nonprofit provider of data and insights for business leaders, expects average salary increases to stay at 3.4% this year, the same as in 2025.

Getting a raise anyway

Workers can still make a case for a pay bump amid the AI boom, said Kris Erickson, cofounder of consulting firm Workforce Science Associates in Lincoln, Nebraska.

"When budgets are tight, and the economy is uncertain, you have to get into sales mode" to successfully secure a raise, she said. "You have to make yourself invaluable."

Given how much money companies are spending on AI in search of productivity gains, highlight any you've realized from using it. Merely saying you know how to use AI is not enough, said David Gaspin, an HR professional and executive coach in New York.

"Asking for a raise because you're proficient in AI is not the strategy," he said. "That proficiency is table stakes at this point."

It's also important to show why AI can't fill your shoes.

"The key differentiator today is becoming: What can you do that can't be replaced with technology? Where is your experience, your judgment, your unique point of view adding tangible, quantifiable value to the business?" said Gaspin. "Because that's where companies are going to see risk in you leaving."

• Packsize founder Hanko Kiessner became a proponent of electric vehicles after developing asthma.
• He installed chargers in his company's parking lot several years ago to help reduce air pollution.
• Kiessner says they're a low-cost perk that can help attract and retain talent, especially when gas prices soar.

This as-told-to essay is based on a conversation with Hanko Kiessner, founder and vice chairman of Packsize, a Salt Lake City-based packaging company. This story has been edited for length and clarity.

We just had a spike in gas prices, and everyone is complaining. I see an affordable solution for employers — one that could also grow worker loyalty: adding EV charging stations to their parking lots.

This is something I discovered after moving in 2002 from Germany, where I grew up, to Salt Lake City and starting Packsize. I didn't know about the air pollution problem here, and after a few years. I developed asthma.

I'd never had this problem before. I'm very active. I run marathons. So I did research to find out what was causing my asthma and concluded that air pollution was to blame. I also learned that air pollution largely comes from vehicles and can cause inflammation in the lungs, which can lead to cancer.

Around this time, electric cars were becoming popular. I learned so much about this disruptive technology that I started a nonprofit called Leaders for Clean Air with several other local entrepreneurs. Our mission is to raise money to buy EV charging stations and have them installed in as many places as possible. We see this as a business matter. We need to attract talent from other markets to grow, and air pollution hinders that.

I also wanted to motivate more people than just me to drive an electric car, so I asked my employees: What prevents you from buying one? And the answer was that charging stations are not ubiquitous. One of the biggest fears for people with EVs is driving to work and not finding a plug. That is scary because now you might not be able to make it home.

We initially set up just three charging stations at our Utah headquarters, where we have about 100 employees. Then all of a sudden, people got EVs, so we added more. Today, we have 53 stations and are close to a 30% EV adoption rate among staff, which means there are some extra plugs for visitors and employees at neighboring businesses. We learned that the infrastructure has to come first. Most employees switched after the charging stations were installed.

These stations are probably one of the cheapest benefits an employer can offer their staff. The cost of electricity at a corporate rate is low — for us, it's about $3 a day per charging station. In today's post-COVID world, it's also a way to get people back to the office.

Here's the really cool thing: I'm now attracting employees who drive EVs, and they're very desirable. They typically care about the environment and understand that EV driving is cheaper than gasoline driving. They also tend to be tech-savvy.

Now that gas prices are so high, more people may consider buying EVs. Oil supply chains are fragile, and we have an abundance of cheap electricity. For employers, helping workers make that switch can be as simple as putting charging stations in their parking lots.