Microsoft Xbox Restructures with 3,200 Layoffs Across ZeniMax Studios

Microsoft is implementing a large-scale restructuring of its Xbox division, eliminating 3,200 roles over the current fiscal year. An initial wave of 1,600 employees was let go in July 2026, with another 1,600 positions expected to be cut by July 2027. The reductions heavily impacted ZeniMax Media Inc. and its subsidiaries, including id Software and ZeniMax Online Studios.

ZeniMax Online Studios lost a significant portion of its workforce, with reports indicating up to half of the developers for The Elder Scrolls Online were terminated. The cuts removed the studio's entire senior leadership team, including studio head Joe Burba, executive producer Susan Kath, game director Rich Lambert, and production director Ala Diaz. Leadership is transitioning to Josh Henderson and Nick Giacomini. Former senior encounter designer Morgan Goin warned that the reduced headcount will prevent the studio from sustaining its previous content release cadence.

Employees from Bethesda Game Studios, Zenimax Online Studios, and id Software organized protests in Rockville, Maryland, and Richardson, Texas, as well as in California and Montreal. These rallies, coordinated by Zenimax Workers United and the Communication Workers of America, demand enforceable layoff protections and a return to contract negotiations. Union leaders allege Microsoft may have violated labor laws by bypassing the bargaining process. While Xbox CEO Asha Sharma described the moves as a company reset, critics and former staff argue that the company is prioritizing unproven AI technology over the creative talent and institutional knowledge required for core franchises.