Xbox layoffs and restructurings hit Bethesda, id Software and other studios, sources report

Xbox is currently in a "reset" period that includes laying off around 3,200 employees over the next year, involving deep cuts at beloved studios like id Software and Obsidian Entertainment. Now, in an attempt to show that things are still running fine, the company has announced a slate of upcoming projects at Bethesda Game Studios […]

This week saw sweeping layoffs and Xbox divesting itself of five studios, shaking up the company once again. Xbox went on a massive buying spree throughout the 2010s and 2020s, but following the costly acquisition of Activision Blizzard and making big bets on Xbox Game Pass that haven't seemed to pay off--as well as rising interest rates and inflation--this blank check policy has had a major impact on Xbox. Several waves of layoffs have hit Xbox's various studios and developers since 2023, with the most recent one being in July 2026. What does this mean for Xbox going forward? According to Xbox CEO Asha Sharma, the goal is to start generating a higher amount of profit, cut out layers of management, and focus on the biggest intellectual property at Xbox, as well as "entertain" 1 billion people every day. However, this has also led to countless layoffs of developers all throughout the ranks, the impact of which we may not fully understand for years, if ever. With Xbox's stated goals established, it's time to look at the current state of Xbox, the projects it has in development, and which studios are still standing following the latest round of layoffs. As a reminder, there are multiple organizations under Xbox, grouped under Xbox Game Studios, Activision, Blizzard, Bethesda, and ZeniMax. We're outlining things to the best of our understanding currently, but it's possible that teams or projects have been disrupted in ways we don't yet know. Gone but not forgotten State of Decay 3 The latest cuts saw five studios trimmed from Xbox. Ninja Theory (Senua's Saga) and Undead Labs (State of Decay 3) will have as-yet unspecified new ownership, Double Fine Productions (Psychonauts 2) and Compulsion Games (South of Midnight) have become independent studios once again, and Arkane Lyon (Deathloop, Marvel's Blade) has started consultation with its Works Council in France to review potential strategic options. Activision's Call of Duty studios Call of Duty: Modern Warfare 4 That annual Call of Duty mega-franchise ain't going to build itself! Call of Duty looks primed to be a massive cash cow for Xbox once again, as it won't be a day-one launch on Xbox Game Pass going forward, which means CoD fans are going to have to pay for it. Each game is a massive project, and alongside core studios like Infinity Ward, Raven Software, Sledgehammer Games, and Treyarch, Call of Duty is also supported by numerous developers such as Activision Shanghai Studio, Beenox, Demonware, Digital Legends, High Moon Studios, and Solid State Studios. Bethesda Game Studios The Elder Scrolls 6 Bethesda has been busy as of late with work on Starfield and ongoing support for Fallout 76, but it looks like the pressure is on for the studio to release both Fallout 5 and The Elder Scrolls 6. A return to Tamriel has been teased for many years, but following the mass layoffs at Microsoft, the developers behind the game believe the recent cuts will have a negative impact on its development. Blizzard Entertainment Overwatch Currently working on core IP such as Diablo, Overwatch, Warcraft, Blizzard is leaning on its biggest brands. The strategy revolves around ongoing seasonal expansions for games like Overwatch, Diablo 4 received its major Lord of Hatred expansion earlier this year, and Overwatch continues to be a key player as part of Blizzard's live-service. As for what's next for the company--while its unions fight to protect employees--the return of BlizzCon in September should shed some light on what Blizzard is up to.  The Coalition Gears of War: E-Day The Gears of War studio is currently in the final stretch of development for the next game in that series, Gears of War: E-Day. Out on October 6, it's being positioned as this year's big Xbox tentpole release. It’ll also be a PC and Xbox-exclusive game, as Xbox continues to reconsider its multiplatform release strategy. Elsewhere Entertainment Activision's Europe-based AAA developer, Elsewhere Entertainment, is currently working on an unannounced, original IP. Halo Studios Halo: Campaign Evolved Formerly known as 343 Industries, Halo Studios will release Halo: Campaign Evolved on July 28. The studio has also been caught in the blast radius of the 2023 and 2025 Microsoft layoffs, and beyond the remake of Halo's campaign, the company is working on the next chapter of the franchise, unofficially called Halo Next, alongside reported remakes of Halo 2 and 3. All development has shifted from the proprietary Slipspace Engine to Unreal Engine 5. Id Software Doom: The Dark Ages One of the studios hardest hit by the "Xbox reset" cuts, Id Software has lost a large portion of talented and veteran developers. The studio recently released a big new expansion for Doom: The Dark Ages, and the developer was reportedly considering working on a multiplayer spin on Doom and a John Wick-inspired game called Fury, while also continuing work on its impressive IdTech Engine. inXile Entertainment Clockwork Revolution Acquired by Microsoft in 2018, InXile's next game, Clockwork Revolution, is expected to launch in 2027. The first-person RPG shooter looks like a Steampunk take on BioShock action, but with a distinctly British feel to its tone and humor. King Candy Crush Saga Like Mojang, the Candy Crush developer will report directly to Sharma from now on. The studio is also working on Minecraft Blast, a match-three game.  MachineGames Wolfenstein 2: The New Colossus MachineGames earned praise for Indiana Jones and the Great Circle in late 2024, and it has since followed up on that game with an expansion. The studio is rumored to be working on a new entry in its Wolfenstein series. Mojang Studios Minecraft Mojang Studios is one of the best acquisitions made by Microsoft, as its signature game, Minecraft, continues to be a best-seller. As of July 2026, the studio will now report directly to Xbox CEO Asha Sharma. As part of the move, Minecraft franchise veteran Helen Chiang has been promoted to the newly created role of Xbox chief operating officer (COO). We're really hoping that these changes won't ruin Minecraft. Obsidian Entertainment The Outer Worlds 2 Another studio hit with layoffs this month, Obsidian Entertainment has been a workhorse developer that released multiple games in record time following its 2018 acquisition. Following Avowed and The Outer Worlds 2 in 2025, the studio was rumored to be working on an Avowed sequel, but recent reports claim this project was canceled and that Obsidian is instead developing a new Fallout game. Playground Games Fable (2027) Playground Games has turned the Forza Motorsport spin-off Forza Horizon into one of the biggest gaming franchises over the course of 15 years, and this year saw the release of the critically acclaimed Forza Horizon 6. Its next game is the Fable reboot in February 2027, which will also receive post-launch DLC. Rare Sea of Thieves Microsoft acquired the venerable British studio all the way back in 2002, and lately, it looks like Sea of Thieves is where it's focusing the bulk of its efforts. While Rare was working on a new game called Everwild--first announced in 2019--it was canceled in 2025 and Rare was caught up in mass layoffs. According to anonymous developers, Rare struggled to find a direction for the Everwild, even after it was rebooted. Turn 10 Forza Motorsport It hasn't been easy sailing for Turn 10--one of the oldest Microsoft acquisitions--and last year's mass layoffs hit the Forza Motorsport studio particularly hard. Content updates for Forza Motorsport came to an end last year, and the studio was reportedly reduced to a support role, helping out Playground Games on Forza Horizon 6. World’s Edge Age of Empires 3 The steward of all things Age of Empires and Age of Mythology, World's Edge appears to have emerged from the recent layoffs relatively unscathed. Thanks to the fact the group is highly specialized and small in number, it can continue to support multiple projects for its dedicated playerbases. These include continuing post-launch support for Age of Mythology: Retold and Age of Empires 4, working on Age of Empires 2: Definitive Edition, which recently received a new expansion, and organizing esports events. Zenimax Online The Elder Scrolls Online Nearly half of ZeniMax Online has been retrenched by Microsoft's cuts, leaving even fewer people to work on The Elder Scrolls Online. The studio also reportedly had a new online game in development--described as Destiny 2 meets Cyberpunk 2077--but this was canceled in 2025.

The Reality Of Xbox’s Plans For ‘Fallout,’ ‘Elder Scrolls,’ ‘Halo’ And More  ForbesXbox Layoffs Will Have a 'Substantial and Cascading Effect' on The Elder Scrolls 6  IGNXbox has laid off 379 Zenimax workers in Maryland  Game DeveloperBethesda pivots to "franchise-centric" planning model amid Xbox restructure  GamesIndustry.bizHundreds of layoffs confirmed at Elder Scrolls Online studio as devastating Xbox cuts continue  Video Games Chronicle

As much as 50 percent of some teams affected by reductions, and more could be coming.

Microsoft recently announced sweeping layoffs affecting 4,800 people, including 3,200 at Xbox alone. This is happening as part of a "reset" of Xbox, and this includes changes to the company's various subsidiaries, including Bethesda. Bethesda boss Jill Braff said the cuts at Xbox "reflect the realities of our industry and business." She said Bethesda has a responsibility to ensure it is "operating from a more stable foundation." In addition to layoffs across the organization--Betheda's id Software, ZeniMax Online Studios, and Obsidian teams were hit particularly hard--Braff said Bethesda needs to rethink how it works and what franchises it focuses on. "To be successful in the future, we need to change course,” Braff said in a memo to staff obtained by IGN. “We must strengthen our business, return to sustainable growth, and ensure we can continue investing in our franchises and our players. I know that doesn't make a day like today any easier.” A fifth mainline Fallout game is among the upcoming projects at Bethesda. Braff did not get into specifics, but said Bethesda will now shift "from a planning model primarily centered on what's next for each independent studio to one that focuses on our strongest franchises and determining the content roadmap that best serves our players and Bethesda as a whole.” Braff went on to say that Bethesda's teams will now focus on "the opportunities with the greatest potential." One of those projects is no doubt The Elder Scrolls 6, which is the next project from Bethesda Game Studios. The Fallout franchise is also particularly popular, with fans eager for Fallout 5. In June, a report said Microsoft was looking to increase its investment in some of Xbox's biggest franchises. The report singled out The Elder Scrolls, Fallout, and Halo, and said the aim was to speed up development on these projects. Microsoft's dramatic cuts to Xbox are the result of "catastrophic mismanagement" by Microsoft leadership as it chase the AI trend, some are saying.

Xbox is cutting 3200 jobs between now and the end of financial year 2027, with studios like Undead Labs and Compulsion Games going independent as others also try to navigate an uncertain future. Moreover, ZeniMax's entire division - which includes all of Bethesda's big studios - is facing major layoffs, even if no studios are being shut down for now. Now, we're hearing id Software has been hit particularly hard just as Doom: The Dark Ages - Revelations prepares to launch later today. Read more