To say that times are difficult for developers under the banner of Microsoft and Xbox would be an understatement. On Monday morning, the publisher initiated a mass layoff wave of 4,800 cuts throughout the firm, with a whopping 3,200 of them — 1,600 now, and 1,600 over the course of the next 12 months — hitting the Xbox division and its studios.

The layoffs are very widespread and are affecting all of Xbox's development teams, with four in particular being divested and Marvel's Blade dev Arkane Lyon also reportedly at risk of closure or being split off from Microsoft. Some groups have also been hit considerably harder than others, and one of these appears to be the developers at ZeniMax and Bethesda, the stewards of Fallout, The Elder Scrolls, DOOM, and other major Xbox properties.

A Bloomberg report suggests ZeniMax and Bethesda have been hit "significantly" by the cuts, and that their studios "will face a significant overhaul" as they pivot to focus on core IPs like Wolfenstein, Quake, and the aforementioned franchises.

In response to the massive surge of layoffs, the official labor union of Bethesda Game Studios has voiced frustrations with the reduction in force on social media. I think it best if you read its message in full, so I've both copied and embedded the complete thread below:

Today we say goodbye to many of our friends and colleagues and to hundreds more across Xbox, including folks that have worked at Bethesda Games Studios for decades.When will this cycle of cuts in pursuit of ever-greater profits end?

— @bethesdaunion.bsky.social (@bethesdaunion.bsky.social.bsky.social) 2026-07-06T21:29:27.360Z

In what is becoming a stressful annual routine, Microsoft has decided to lay off thousands, including MANY of us at Bethesda Games Studios.

With over 10k developers already cut from previous rounds, those at the top have deemed that insufficient in fixing their mistakes.

Today we say goodbye to many of our friends and colleagues and to hundreds more across Xbox, including folks that have worked at Bethesda Games Studios for decades.

When will this cycle of cuts in pursuit of ever-greater profits end?

Because of our One BGS union, we have the right to negotiate over the impacts of these layoffs, helping secure stronger severance packages and better support for those leaving the company.

We will do everything we can to make sure our friends are properly taken care of.

— Bethesda Game Studios Union

The union's strongly critical comments bring cuts from the past several years to mind, referencing other waves of mass layoffs that have struck Microsoft and Xbox such as 10,000 in 2023, additional cuts in early 2025, and last year's infamous game cancelations and closure of The Initiative that came with 9,000 additional discharges across the firm's workforce.

These new layoffs are the latest in a brutal series of cuts that have plagued the gaming industry since 2022, with game publishers worldwide dismissing countless developers after overinvestments in gaming during the pandemic and amid economic challenges such as the onset of tariffs and the ongoing memory and hardware crisis caused by AI.

Xbox's new CEO Asha Sharma has said that Microsoft has "overextended" with Xbox, leading to the current situation in which layoffs like these represent "necessary changes." Bethesda's union seems to disagree, but either way, it's heartbreaking to see so many developers that build the games we love get their lives upended by massive corporate reorganizations like this one.

As I've written so many times before covering layoffs like these, I sincerely hope that everyone affected is able to find new and stable work as quickly as possible, and that they're given proper severance packages and ample support.

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Microsoft and Xbox CEO Asha Sharma announced a massive restructuring for the gaming brand on Monday morning, with reports indicating that 1,600 roles have been cut immediately with another 1,600 layoffs planned throughout the next 12 months. In total, 3,200 Xbox staffers will be affected, with 4,800 cuts in total hitting Microsoft overall.

These reductions are coming across the entirety of the Xbox Game Studios publishing wing, though some studios will be affected more than others. Notably, though, Compulsion Games (South of Midnight), Double Fine Productions (Psychonauts, Keeper, Kiln), Ninja Theory (Hellblade, Senua), and Undead Labs (State of Decay 3) are all splitting off from Microsoft entirely (though thankfully, they're not closing and their work-in-progress projects will remain in development).

Reportedly, another group of developers that's been hit particularly hard by the layoffs are the teams at Bethesda and ZeniMax, known for their work on legendary franchises like Fallout, The Elder Scrolls, DOOM, Wolfenstein, and Quake.

According to Jason Schreier of Bloomberg, ZeniMax/Bethesda "will face a significant overhaul" as a result of these cuts, and will be driven to focus on the aforementioned IPs that stand as its "biggest franchises." It's notable that it won't only work on Fallout and The Elder Scrolls, though, as I've noticed lots of recent rumors suggested that might be the case.

Many of those rumors stemmed from a report in which it was said Sharma wants Xbox to "move faster" with its core franchises, with Fallout and The Elder Scrolls directly named alongside Halo.

"ZeniMax will be impacted significantly by the reorganization but will NOT be reduced to only Fallout and The Elder Scrolls, despite rumors over the last few weeks," Schreier wrote in a post on Bluesky. "The publisher will also still work on Wolfenstein, Doom and Quake."

It's worth noting that the fate of one ZeniMax team, Arkane Lyon, is currently unclear. Arkane is developing Marvel's Blade, which has reportedly been delayed and is "running over budget." We've previously reported that Microsoft is negotiating with the French government to figure out a path forward for the studio and avoid closure while hopefully also keeping the game alive, but that's all we know for now.

In 2024, Microsoft and Xbox shuttered ZeniMax/Bethesda developers Arkane Austin (Prey, Redfall), Alpha Dog Games (Mighty Doom), and Tango Gameworks (Ghostwire: Tokyo, Hi-Fi Rush), with PUBG's Krafton stepping in to save the latter studio from the axe.

I'm glad that ZeniMax/Bethesda will still be able to explore new projects for its big properties outside of behemoth franchises like Fallout and The Elder Scrolls, though the situation with Arkane and the layoffs overall are still terribly unfortunate. Developers that have worked together in these teams for years and years are being let go, further adding to the devastating number of 2022-2026 video game cuts we've already seen.

Notably, The Elder Scrolls Online's content roadmap is "shifting" due to layoffs at ZeniMax Online Studios. Bethesda Game Studios, meanwhile, remains focused on The Elder Scrolls 6 as far as we know, which is still "a long ways off."

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