Report: Bethesda layoffs may be happening as Xbox Game Studios breaks up

Microsoft is currently breaking up its Xbox Game Studios label to reduce costs, and the layoffs are also hitting other divisions like ZeniMax.

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New reports indicate that layoffs have begun at Bethesda's parent ZeniMax. People behind the scenes have told Duke Nukem creator George Broussard that layoffs are currently happening at ZeniMax, potentially affecting all groups under the limited-integration company--ZeniMax Online Studios, Bethesda Game Studios, id Software, Arkane Lyon, and Machine Games.

"Getting word that layoffs at Zenimax has begun. Heard rumblings recently that the cuts may be much deeper than you expect," Broussard said on Twitter. The 3D Realms co-founder goes on to say that only developers working on Fallout and The Elder Scrolls may be 'safe' from the layoffs.

The news comes shortly after reports that Xbox CEO Asha Sharma would now be prioritizing these very franchises--Fallout, The Elder Scrolls, and Halo--as core games for the Xbox brand.

Essentially, Microsoft is selecting to spend its money in these three franchises first beyond others. Activision Blizzard King is apparently separate from this consideration, perhaps because ABK has mega-earning franchises like Call of Duty, World of Warcraft, Candy Crush, Diablo, and Overwatch.

Microsoft is currently shifting the Xbox business and has been caught in a PR nightmare due to how it has handled the Senua situation, not to mention the reports of key studios like Compulsion, Ninja Theory, and Double Fine facing shut downs and currently negotiating for their independence.

No details have been officially released from Microsoft or Xbox's new leadership team, and the communications have been silent as these rumors and reports run rampant.

Xbox's Sharma has inadvertently hinted at layoffs by saying that the business will soon be "reset" after delivering a paltry 3% profit margin for Fiscal Year 2026.