Disney Interactive laid off some 700 employees - or roughly a quarter of its global staff - on Thursday.
The layoffs were reported by the New York Times and confirmed by Disney Interactive president James A. Pitaro.
Pitaro said the staff reductions were part of "large-scale changes as we focus not just on getting to profitability but sustained profitability and scalability."
Though Disney Interactive houses Disney's video games unit, including its mobile and social games business and Disney Infinity developer Avalanche Software, it also houses divisions responsible for Disney's web presence.
Disney Interactive co-president John Pleasants resigned in November when Disney moved to merge its online and game operations. Disney Infinity largely accounted for the division's recent surge in profits after years of losses.
The firm has moved to double down on its most successful businesses, a philosophy that led Disney Interactive to shut down Epic Mickey developer Junction Point in January and begin outsourcing most of its development efforts.
The Austin, Texas-based studio was formed in 2005 by Deus Ex creator Warren Spector and other former employees of defunct developer Ion Storm.