Every major Xbox change, cancellation, and rumor you need to know right now

The last several months have been a roller coaster for Xbox. On Sept. 22, chief content officer Matt Booty disclosed 268 more layoffs, as well as the consolidation of smaller studios like Obsidian and Rare into larger ones, namely Bethesda and Activision. Back in July, CEO Asha Sharma announced that Microsoft would cut a total of 3,200 jobs by July 2027. As of now, we've seen roughly 1,900 layoffs, with 1,600 in July and now these additional 268. That means there's still about 1,400 layoffs looming for Xbox staffers in the months ahead.

Microsoft's gaming division saw a major leadership turnover back in February, with CEO Phil Spencer abruptly leaving the company along with his heir apparent Sarah Bond. Sharma and Booty moved quickly to reestablish trust in the flagging brand by cutting prices on Xbox Game Pass after last year's wildly unpopular price hikes and affirming next-gen plans in the form of Project Helix. Then, just three days after Xbox's barnstorming summer showcase on June 7, Bloomberg reported that major layoffs were in the works. (Several games shown during the showcase were made by studios Xbox would "divest" from just weeks later.) Sharma and Booty confirmed these reports in a July 6 post on Xbox Wire that outlined plans for a "reset" over the coming 100 days. (As of Sept. 22, we're 78 days in.) Reasons cited for the reset included lousy revenue, increasing hardware costs, and Xbox's excessive expansion during the pandemic years.

It may take weeks or even months until we get an exact picture of all the changes taking place at Xbox, but here's what we know. The stories below are presented in reverse chronological order, so the newest developments will appear at the top.

Obsidian will retain its 'creative identity' at Bethesda

Image: Obsidian Entertainment/Xbox Game Studios

In an internal memo following news of the Sept. 22 changes, Bethesda Game Studios head Jill Braff said, "Today’s announcement is primarily a change in reporting structure. The creative identity and strengths that make Obsidian distinct will remain at the core of their studio and work."

While Obsidian seems likely to survive and not be transformed into a support studio for Bethesda, it probably won't enjoy the same freedom to experiment that it has enjoyed in years past. Elsewhere in the memo, Braff foregrounded the two studios' collaboration on an upcoming Fallout project, noting that "this structure supports the franchise-led model we’ve been strengthening while keeping accountability for both the studio and the franchise clear."

World's Edge's next game canceled, team slashed

The Age of Empires developer, which now operates under Activision, was hit hard by the Sept. 22 cuts. According to a ResetEra post by former creative director Adam Isgreen, Xbox eliminated roles for nearly half the studio, including his own job. World's Edge software engineer Andrew Martz wrote on LinkedIn that Microsoft had also canceled the studio's next project.

"Today our studio was reorganized to be under the Activision umbrella. As part of that reorg, our next project was cancelled and a large chunk of our studio was laid off. I was part of that layoff," he said. Martz noted that he had previously been laid off by another Xbox team last May, and had only joined World's Edge in February 2026.

Activision absorbs Halo and Rare

Image: Bungie/Xbox Game Studios

On Sept. 22, Booty announced 268 layoffs affecting Halo Studios, Xbox Game Studios, and "other first-party studios." He also said Activision will develop the next Halo title, led by a new team that will operate separately from the Call of Duty franchise. The remaining folks at Halo Studios will continue supporting the franchise's existing games.

Two smaller studios will also move beneath Activision's umbrella. One of these is World's Edge, which makes the Age of Empires series of historical real-time strategy games. The other is Rare, which produced some of the all-time bangers of the Super Nintendo and N64 eras, including Donkey Kong Country, GoldenEye 007, and Banjo-Kazooie. Microsoft acquired Rare back in 2002, and its most recent game is 2018's live-service pirate adventure Sea of Thieves.

Obsidian goes to Bethesda

According to Booty, "Bethesda will expand its remit to include Obsidian, which will continue its current projects, including Grounded, as well as the new Fallout project made in collaboration with Bethesda Game Studios." Obsidian is the studio behind the Outer Worlds series, Fallout: New Vegas, Pentiment and South Park: The Stick of Truth, and the Pillars of Eternity series. The extent to which Obsidian will operate independently of Bethesda is unclear at this stage. That said, it's probably safe to assume we aren't getting Pentiment 2 anytime soon.

Uncertainty for Ninja Theory and Arkane

Booty also provided updates on the five studios Xbox moved to divest from back in July. Both Compulsion and Double Fine have managed to go independent and maintain control of their IP. Undead Labs still plans to release State of Decay 3 with a new publisher, and announced on Sept. 22 that it has gone independent and is now employee-owned. Xbox is continuing talks with Arkane, and the status of development on Marvel's Blade remains unclear. Two potential deals to acquire Hellblade maker Ninja Theory have fallen through in recent weeks, and Booty said "we will now begin consultation with employees on a proposed closure while continuing to explore other paths forward."

A major strategy pivot at Bethesda

Image: Bethesda Game Studios/Bethesda Softworks

On July 17, Bethesda Game Studios shared a detailed roadmap outlining the future of its major franchises, which include Fallout, The Elder Scrolls, and Starfield.

As has been widely reported and speculated, Fallout will be a major focus of the studio in the months and years ahead, with the studio noting that "we have multiple Fallout projects in active development right now." Bethesda also said Fallout 5 "remains our long-range destination," and later says the game is in "pre-production." The studio also confirmed that "remasters for both Fallout 3 and Fallout: New Vegas" are in the works, the latter coming from Obsidian Entertainment, but did not provide any information about a release date for either. Bethesda also teased a 30th anniversary event in Washington, D.C. in 2027, so we can probably expect some clarity on the timeline then.

The Elder Scrolls 6 is currently the team's "primary development focus." The studio added, "The next chapter is on the way. We’re where we planned to be, loving how it looks, and playing it every day."

Despite an underwhelming PS5 launch back in April, Starfield will continue to see further updates and support. "As we enter Year 3, we'll continue expanding the Settled Systems with new stories, targeted gameplay improvements, and additional updates, while preparing for the launch of new Starborn content next year." Starborn content refers to Starfield's post-game, so it sounds like these expansions will aim to serve the game's existing fanbase, rather than luring in new players.

Big changes at ZeniMax

The studio behind The Elder Scrolls Online has made some significant changes to senior leadership in recent weeks, according to a July 15 report from Stephen Totilo at Game File. While it was not clear when Xbox first announced the layoffs, we now know ZeniMax studio lost 379 employees in Microsoft's latest round of cuts, including studio head Joe Burba, who had been there for 14 years.

Several development leads on ESO will also leave the company, including executive producer Susan Kath, studio game director Rich Lambert, and production director Ala Diaz. According to Game File, those four senior staffers informed colleagues that the transiition will occur “over the next few months,” and that they plan to "remain in place during the transition period to help ensure a smooth handoff.”

Morale in the toilet

Image: Xbox

According to a July 15 report from GameDeveloper, remaining staffers at Xbox's stable of studios are understandably anxious after the company's fifth wave of layoffs since January 2024. One source told the outlet that 136 people at id Software were laid off simultaneously in a call that lasted less than 60 seconds during this latest round of cuts.

One source at id questioned why the changes came just one day before the launch of the studio's major expansion for Doom: The Dark Ages on July 7. "They didn't even wait to see if the product is successful before they got rid of the team," they explained. "There are no benefits to being owned by Microsoft."

"I don’t know how anyone remaining at Xbox studios can feel safe knowing another 1600 cuts are coming. And even then, what happens after June 2027? Will we get layoffs in July for the third year in a row?" another source told GameDeveloper.

Making sense of the layoffs

A day after Sharma's July 6 memo, we're starting to get a clearer picture of what's going on at the Xbox studios that aren't going independent or being acquired by new owners.

• The Elder Scrolls Online developer ZeniMax Online Studios has been "seemingly gutted," according to a Kotaku report.
• Doom and Wolfenstein developer Id Software reportedly lost as many as 95 staffers, according to VGC.
• Obsidian Entertainment — the developer behind The Outer Worlds, Pentiment, and Grounded — has reportedly lost 25% of its staff in the cuts, which shakes out to roughly 60 to 70 employees. This includes the studio's art director, who had been with Obsidian for 21 years.

Game Pass has missed the mark big time

Image: Microsoft

Xbox doesn't release subscriber numbers for Game Pass very often, and when a company does that, it usually means the numbers aren't very impressive. According to a Wall Street Journal report from July 6, Game Pass currently has 30 million subscribers — that's fewer than half of the 77 million players the company had hoped to reach by July 2026, according to Microsoft court filings from its Federal Trade Commission trial over the Activision deal. The last time Microsoft publicly reported the number of Game Pass subscribers was in February 2024, when the service had 34 million users. Clearly, Game Pass hasn't quite recovered from those eye-watering October 2025 price hikes, even after they were rolled back earlier this year.