Report: Mass Xbox layoffs will impact Fallout and The Elder Scrolls devs Bethesda and ZeniMax “significantly” — they’ll focus on their “biggest franchises” like DOOM

Developer July 6, 2026No Comments

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.

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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.

While Xbox’s Bethesda and ZeniMax teams are facing “a significant overhaul” due to layoffs, they’ll continue to work on franchises like DOOM, Wolfenstein, and Quake. (Image credit: Xbox Game Studios)

“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.”