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Microsoft’s big lead over AI competitors like Google and others has vanished, and the company is now playing catch-up. As a result, Microsoft’s stock has tanked in the last year — down roughly 23% compared to a year ago, due mainly to its massive AI spending and an inability to monetize Copilot. 

The company clearly needs to do something. And last week it did, though not what you might expect. It laid off 4,800 people, a little more than 2% of its worldwide workforce, with its Xbox division hit hardest. And it’s not reducing its massive spending on AI data centers or other AI-related costs.

The New York Times explained the cuts this way: “It is Microsoft’s latest employee culling as it plows tens of billions of dollars into the infrastructure for building artificial intelligence.”

Was cutting back on gaming (while still going all-in on AI) the right move for Microsoft? To answer that, let’s take a look at the details of the company’s July layoffs.

A year of layoffs

The recent cuts come in the wake of larger Microsoft workforce reductions over the last year or so. In May 2025, the company laid off 6,000 employees, about 3% of its workforce. Then a few months later, it laid off 9,000 more, about 4% of its workers. In both rounds of cuts, the company’s gaming division was hit — though it wasn’t the primary target.

This year, in April and May, the company rolled out its first voluntary retirement program for US employees. Approximately 3,000 people took the money and ran.

Then came last week, when Microsoft primarily targeted gaming. When the cuts take full effect over the next year, 2,850 gaming employees will be let go. In addition, Microsoft is cutting loose several of its gaming studio brands, which will become independent companies or be sold to buyers.

The layoffs hit the two remaining gaming studios, Activision Blizzard, which makes the big-selling games Call of Duty and Candy Crush, and ZeniMax Media, which publishes series including Fallout and The Elder Scrolls. Three years ago, in 2023, Microsoft bought Activision Blizzard for $69 billion. That followed its purchase of ZeniMax Media in 2020 for $7.5 billion. Both seemed like sizable acquisitions at the time. 

Compared to Microsoft’s AI spending now, they’re chump change.

Follow the money

A memo sent to employees about the July layoffs by Amy Coleman, Microsoft executive vice president and chief people officer, made clear the layoffs were more about AI than they were about gaming. 

Of the cuts, she wrote: “The “why” is this: our business is changing because the world around it is changing. The way technology is built, deployed, and used is transforming faster than at any point in my time here. Our customers’ needs are shifting, the business models that serve them are shifting, and that means the work itself — what we do, where we focus, and how we’re organized — has to transform, too.

“Our customers are navigating this same shift, and they’re counting on us to help them through it.”

That last sentence is an oblique reference to the early July launch of the Microsoft Frontier Company, which will embed 6,000 engineers inside customers’ businesses to help them more effectively deploy AI. The cost: $2.5 billion.

That sounds like a substantial amount of money. But it’s only a drop in the bucket of how much money the company plans to spend on AI. In April, Microsoft told investors it would spend $190 billion on data centers and other AI infrastructure this year, a 60% increase over what it spent last year. At the same time, Microsoft said it would shrink its workforce.

Its latest layoffs are clear-cut evidence of that. It’s also evidence that the company recognizes how badly Xbox has performed, and that it needed to do something about it. 

In early June, Microsoft sent a memo to everyone in its Xbox division entitled “Next 100 Days: XBOX Reset.” The memo laid out the problems with its ailing game business and pulled no punches. It noted that beyond the $69 billion the company spent three years ago to buy Activision, “Over the past five years, we have spent over $20 billion on ongoing investments in our content, platform, and hardware subsidy, but our annual revenue has declined nearly half a billion during that time. Going forward, this cannot continue.” 

The layoffs and spinoffs were the first steps. They won’t be the last.

There’s no doubt this is just the beginning of Microsoft’s disinvestment in gaming. The issue isn’t just that the company’s investments haven’t paid off. It’s that Microsoft’s AI ambitions are so large and expensive that it can no longer afford to seriously fund gaming.

Ultimately, it was the right thing to do, at least from a business perspective. The future is AI. It’s not in gaming.

So, for the foreseeable future at Microsoft, when it comes to AI — the sky’s the limit. But when it comes to gaming, things look much less rosy.

Microsoft is now testing a cleaner and faster version of Windows Search that should prioritize relevant results over ads and promotional content. [...]

A newly documented phishing-as-a-service platform distributed through Telegram is lowering the technical barrier to Microsoft 365 account takeovers by giving less-skilled attackers automated tools to evade some authentication controls and retain access after compromise.

The platform, called Forg365, uses AI-assisted lure creation alongside device-code abuse and adversary-in-the-middle techniques, according to research published by security company ZeroBEC.

Forg365 was offered with a five-day free trial, followed by subscriptions priced at $400 per month or $3,800 per year, the researchers said.

Customers can build phishing lures and control email delivery through a single operator panel. They can also manage captured account data and monitor compromised Microsoft 365 mailboxes. The service includes templates that impersonate widely used business platforms such as DocuSign, Adobe Acrobat Sign, SharePoint, and OneDrive.

“Phishing-as-a-service has been around for quite a few years,” said Jonathan Ong, senior analyst for managed security services at Omdia. “But the degree to which AI is integrated into Forg365 and enables users is what makes it concerning.”

Forg365’s significance lies in the industrialization and productization of the operator workflow, according to Devashri Datta, a cybersecurity researcher. “It integrates AI-assisted lure creation, evasion, and post-compromise mailbox operations into a subscription service distributed through Telegram,” Datta said.

How Forg365 works

ZeroBEC said the campaign it investigated began with an email built around a business-document and remittance-approval pretext. The message relied on legitimate cloud and email services before sending the recipient through several redirects.

Forg365 classified visitors before deciding whether to display a device-code phishing page, an adversary-in-the-middle flow, or a harmless decoy.

In the device-code attack, the victim is directed to a legitimate Microsoft authentication process and persuaded to enter a code that authorizes a session controlled by the attacker. The involvement of genuine Microsoft infrastructure can make the request appear credible.

The platform can also relay authentication through an adversary-in-the-middle attack and capture session information. ZeroBEC said suspicious visitors were diverted to a benign page, helping the operators conceal the phishing flow from researchers and automated security tools.

Complicating incident response

A browser extension called ForgCookie allows attackers to generate and refresh Microsoft single sign-on cookies from their own browsers, ZeroBEC said.

Forg365 also advertises tools for keeping sessions active and monitoring a compromised inbox. Read-only access to the mailbox can then be shared through a password-protected link.

As a result, resetting a password may not remove the attacker. Stolen refresh-token material or an attacker-controlled session could remain usable after the password is changed. Any devices registered during the compromise must also be investigated.

“CISOs should treat two controls as co-equal priorities rather than sequential ones,” Datta said, referring to tightly restricting device-code authentication and deploying phishing-resistant MFA such as FIDO2 or WebAuthn passkeys.

Organizations that do not require device-code authentication should consider blocking it in Microsoft Entra ID, said Keith Prabhu, founder and CEO of Confidis. This can disrupt the device-code component of a Forg365 campaign, although it would not stop attacks that rely on adversary-in-the-middle techniques or stolen session cookies.

Companies that still depend on device-code authentication should identify legitimate uses before imposing a broader restriction. Exceptions may be needed for some command-line tools, conference-room systems or other devices with limited input capabilities.

Deploying phishing-resistant authentication may also require hardware security keys or managed smartphones and could increase support requests during the transition, Datta said.

After detecting a compromise, response teams should revoke active refresh tokens and terminate existing sessions. Prabhu also recommended reviewing and revoking unauthorized OAuth permissions. Because ForgCookie runs in the attacker’s browser, defenders should look for repeated silent sign-ins and non-interactive Microsoft Graph activity from unfamiliar addresses, according to ZeroBEC.

Mailbox forwarding rules and delegated access should be reviewed for unauthorized changes, Prabhu said. Such changes could allow attackers to monitor communications or retain access after a password reset.

“IR teams should audit newly registered devices and remove any that cannot be attributed to the user,” Datta said. Teams should also check whether an attacker enrolled an unauthorized authenticator application or passkey during the compromise, she added.

ZeroBEC found that some devices registered during its investigation had names beginning with “Forg365,” giving defenders a possible indicator of compromise.

The article originally appeared on CSO.

The U.S. Treasury Department's Office of Foreign Assets Control (OFAC) sanctioned two individuals and one entity for enabling ransomware attacks against U.S. organizations. [...]

xAI's Grok Build coding CLI was uploading entire Git repositories, full commit history and all, to a Google Cloud Storage bucket run by xAI, not just the files a coding task needed. A researcher publishing as cereblab, testing version 0.2.93, captured one of those uploads, cloned the git bundle out of the intercepted request, and pulled back a file the agent had been told in plain terms not

xAI's Grok Build coding CLI was uploading entire Git repositories, full commit history and all, to a Google Cloud Storage bucket run by xAI, not just the files a coding task needed. A researcher publishing as cereblab, testing version 0.2.93, captured one of those uploads, cloned the git bundle out of the intercepted request, and pulled back a file the agent had been told in plain terms not Swati Khandelwalhttp://www.blogger.com/profile/[email protected]

The U.S. Treasury Department's Office of Foreign Assets Control (OFAC) has designated two individuals and a VPN service provider for enabling ransomware actors' and other cybercriminals' malicious activities, including ransomware attacks against Americans. The VPN, named First VPN Service (1VPNS), has been accused of offering its tools to ransomware groups, along with its 45-year-old Ukrainian

The U.S. Treasury Department's Office of Foreign Assets Control (OFAC) has designated two individuals and a VPN service provider for enabling ransomware actors' and other cybercriminals' malicious activities, including ransomware attacks against Americans. The VPN, named First VPN Service (1VPNS), has been accused of offering its tools to ransomware groups, along with its 45-year-old Ukrainian Ravie Lakshmananhttp://www.blogger.com/profile/[email protected]

A campaign of 148 npm packages disguised as student web proxies turned visitors' browsers into a distributed denial-of-service botnet for roughly two weeks in May, according to new research from JFrog. The packages did not go after the developers who might install them. The operators used the registry as free hosting for a booby-trapped proxy site and let the students who came to dodge

A campaign of 148 npm packages disguised as student web proxies turned visitors' browsers into a distributed denial-of-service botnet for roughly two weeks in May, according to new research from JFrog. The packages did not go after the developers who might install them. The operators used the registry as free hosting for a booby-trapped proxy site and let the students who came to dodge Swati Khandelwalhttp://www.blogger.com/profile/[email protected]

Attackers whose methods line up with the data-extortion group ShinyHunters have spent the past year walking into corporate Salesforce environments without exploiting a single flaw in the platform. The way in has been the trust the organization had already extended, usually through the OAuth connections that tie Salesforce to the apps and third-party vendors around it. In 

Attackers whose methods line up with the data-extortion group ShinyHunters have spent the past year walking into corporate Salesforce environments without exploiting a single flaw in the platform. The way in has been the trust the organization had already extended, usually through the OAuth connections that tie Salesforce to the apps and third-party vendors around it. In Swati Khandelwalhttp://www.blogger.com/profile/[email protected]

OpenClaw’s announcement that it has become a nonprofit foundation is generating IT excitement because of the potential for governance and development consistency that the popular platform has thus far lacked. Still, some worry about the risks created by the move. 

“Our ambition is for OpenClaw to be the Switzerland of AI. Neutral ground where every model and every lab can plug into the technology and collaborate on standards in the era of agents,” OpenClaw said in a post. “That work is already underway in Foundation-convened councils on agent identity, agent profiles, evals, and enterprise deployment.”

The statement, co-authored by OpenClaw creator Peter Steinberger, pointed out, “the great open source projects of our time — Linux, Apache, Mozilla — endure because a neutral steward stands behind them. That is the role we are taking on to keep OpenClaw MIT licensed, open, and independent so that everyone building on it can trust it will be here for the long term.”

But it reassured users that the original OpenClaw leadership is still in charge.

“Peter built this thing and Peter keeps making the calls, especially the technical ones. Since joining OpenAI earlier this year, he has continued to steward OpenClaw as an open and independent project, and OpenAI has made a commitment to keep it that way,” the post said. “The foundation is here to serve: good governance, stable funding, and paying the people who keep the claws alive.”

However, some analysts and consultants were skeptical about how much true independence Steinberger would have, given his salaried role with OpenAI. 

Neutrality claim in question

“The Switzerland of AI neutrality claim collapses under its own announcement,” said Noah Kenney, principal consultant at Digital 520. “OpenAI runs a team [at OpenAI] called Claw Labs that Peter leads and OpenAI is a major donor to OpenClaw. The ‘neutral steward’s’ chief technical decision maker is employed by one of the competing labs it is supposed to be neutral with.” To OpenAI, he said, OpenClaw is closer to a tax-exempt nonprofit subsidiary than it is to a neutral ‘Switzerland of AI.’

He pointed out that, in addition, Microsoft is shipping the enterprise version of OpenClaw, and Nvidia is shipping the hardware bundle. “This is being called the Switzerland of AI, but Switzerland does not have its central bank run by France,” he observed.

Kenney said that what the new OpenClaw has actually built is “a shared dependency that several competitors fund, staff, and steer, wrapped in a nonprofit structure. Enterprise IT should understand that structure, because treating OpenClaw as neutral is a mistake,” adding that CIOs need to look at this development devoid of the emotional component. 

“There is a strategic irony here that CIOs should sit with,” Kenney said. “If OpenClaw succeeds at becoming the universal agent substrate, then every model plugs into the same identity layer, the same profiles, and the same deployment plumbing. The thing every vendor is racing to own becomes a commodity that nobody owns.” He pointed out that, in the short term, that is genuinely good news for buyers because it means less lock-in and more portability.

“But,” he said, “when the connective tissue is free and natural, the only labs that benefit are the ones with the best models and the deepest distribution. Commoditize the layer below you and you compete on the layer where you are already strongest. The foundation is not a charity. It is the biggest players agreeing to stop fighting over the plumbing so they can fight over the water, and the enterprise is the one paying the water bill either way.”

Good news, bad news

Jason Andersen, principal analyst at Moor Insights & Strategy, liked the potential consistency that could emerge from the structural change, given the complexity of agent development today. 

“We are seeing a lot of OpenClaw variants hit the market, such as those from Nvidia as well as competing products from cloud and SaaS vendors. A common base helps solidify the common parts,” Andersen noted. “That said, a common challenge is the sustainability of these open source foundations over time. In addition to releasing code, these foundations need funding to evolve and grow. And that funding needs to come from continued momentum to incentivize existing members to increase investment and recruit new members to join.”

Andersen stressed that IT buyers need to keep an eye on the roadmap for any OpenClaw variant they choose to deploy, “as that will directly impact the foundation, and the momentum of the foundation and common base. If the common base loses momentum, it can lead to forks, or just a loss of innovation. When that happens, members tend to back away, which puts customers in limbo.”

But not everyone sees the promised structure as entirely good for IT.

Ishraq Khan, CEO at coding productivity tool vendor Kodezi, said, “most CIOs do not want to bet their future entirely on a single model vendor. They want Claude for some workloads, GPT for others, open models for sensitive environments, and potentially internally fine-tuned systems for specific use cases. The problem is that every vendor currently brings its own identity system, tool interfaces, permissions model, and operational assumptions. That fragmentation does not scale.”

He said, “the risk if standards fail is straightforward: every vendor builds its own closed ecosystem, enterprises become locked into individual stacks, and security becomes dramatically harder. The opportunity if OpenClaw succeeds is equally significant: enterprises get portable agents, common identity standards, interoperable tooling, and a healthier competitive market around models rather than ecosystems.”

Will it remain a nonprofit?

However, said Justin Greis, CEO of consulting firm Acceligence, one of the key details that IT executives will want to keep in mind is that OpenAI also began as a nonprofit, but it was quickly seen as not adhering to nonprofit objectives. 

“OpenAI’s transition from a nonprofit research organization into a more complex structure highlighted the challenge of maintaining mission alignment while scaling technology, capital, partnerships, and commercial operations,” Greis said. “OpenClaw has the opportunity to address some of those governance questions earlier by establishing clear principles around neutrality, transparency, and decision-making before the ecosystem becomes even larger and more valuable.”

He noted, “we have seen this pattern before with technologies like Linux and Kubernetes. The strongest open ecosystems succeeded because they created trusted foundations that enterprises could build upon. The technology was important, but the governance model that underpinned it was equally critical.”

Risks are ‘squarely in IT’s lap’

Consultant Brian Levine, executive director of FormerGov, echoed Greis’ concerns. 

“CIOs shouldn’t assume that this nonprofit will always be a nonprofit, or confuse being a nonprofit with actually being neutral or unbiased,” he said. “The risks are squarely in IT’s lap: autonomous agents ‘with their own identity’ acting on a user’s behalf blow straight through traditional IAM assumptions. Issues, such as agent identity, auditability, secret handling. Identity boundaries have not yet been reliably solved. Until they are, enterprises should treat OpenClaw agents like privileged service accounts, not like a browser plugin.”

Independent cybersecurity and risk advisor Steven Eric Fisher pointed to another IT exposure that might come from this OpenClaw transition: Cost.

“OpenClaw currently has a very high token burn rate in usage, which presents a significant cost consideration for large-scale enterprise adoption,” he said. “The skills marketplace introduces a new supply chain threat that enterprises will need to manage. Threat management, and specifically handling external marketplace elements, can be highly challenging for open-source operations. Ultimately, at scale, enterprise adoption could become a difficult balancing act between managing high operational costs and securing an expanded security surface.”

The federal government is warning users of home and small office routers to secure their devices as Russia state hackers continue to mass-compromise them for use in obscuring nefarious actions against sensitive organizations in the public and private sectors.

Both the Russian and Chinese governments have been compromising routers for years, sometimes in prolonged tugs-of-war to wrest control of devices the other has already commandeered. The US government has occasionally issued covert commands and taken other steps to disinfect routers. Google and other companies have also worked to disrupt the massive botnets that control compromised routers in lockstep. The actions to date are little more than whack-a-mole exercises as the operators simply replace their botnets with new ones.

Proxy networks: The go-to tool

“Russian Federal Security Service (FSB) Center 16 cyber actors continue to exploit poorly configured and vulnerable networking devices worldwide, opportunistically compromising multiple critical infrastructure sector networks,” the Cybersecurity and Infrastructure Security Agency said Monday. The hacking groups are tracked under various names, including Berserk Bear, Energetic Bear, Crouching Yeti, Dragonfly, Ghost Blizzard, and Static Tundra. The advisory was co-issued by governments from around the world, including Australia, Denmark, New Zealand, and the UK.

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Cybersecurity researchers have flagged a new macOS information stealer called CrashStealer that's capable of harvesting sensitive data from compromised systems. Unlike other information stealers that are built on AppleScript droppers or Objective-C-based wrappers, CrashStealer is implemented in native C++, according to Jamf Threat Labs. "It validates the victim's login password locally before Ravie Lakshmananhttp://www.blogger.com/profile/[email protected]