Xbox Layoffs Slash Up to Half of ESO Team as Season 1 Launch Nears
Updated
Updated · Kotaku · Jul 6
Xbox Layoffs Slash Up to Half of ESO Team as Season 1 Launch Nears
3 articles · Updated · Kotaku · Jul 6
Summary
More than 20 Zenimax Online Studios employees have publicly reported layoffs, and staff told Kotaku the cuts may have hit as much as half of The Elder Scrolls Online's development team.
HR group meetings delivered the layoffs as part of Xbox's broader restructuring, which Bethesda said was meant to improve long-term growth by concentrating on major franchises including Fallout, The Elder Scrolls, Doom and Quake.
Jessica Folsom said ESO remains supported, but previously shared roadmaps will shift while the team reevaluates work and prepares an updated schedule.
Season 1 is still due to launch in two days, yet employees told Kotaku they are uncertain how the 2014 MMO can keep operating with so many staff gone.
The cuts hit one of Bethesda's biggest live-service businesses—ESO had generated $2 billion by 2024 and was reportedly bringing in about $15 million a month—after the team was already hit by layoffs last year.
Is Microsoft preparing to sacrifice its Xbox division to win the escalating artificial intelligence race?
How will a severe hardware crisis force Microsoft to reinvent its next-generation Xbox console?
With studios closing and key franchises underfunded, what is the real future for Xbox's exclusive games?
Xbox Reset 2026: Microsoft’s Urgent Restructuring Amid AI Pivot, Studio Closures, and a 3% Profit Margin Crisis
Overview
In July 2026, Microsoft’s Xbox division faced immediate and significant changes after the 'Xbox Reset' memo from CEO Asha Sharma and CCO Matt Booty. This strategic re-evaluation triggered urgent actions across the division, as Xbox’s profitability fell far below Microsoft’s expectations—projected at just 3% for the year, compared to the company’s 30% target. Despite investing over $20 billion in content, platforms, and hardware in recent years, Xbox struggled with financial underperformance. These challenges led to a wave of restructuring, aiming to realign Xbox with Microsoft’s broader goals and restore its financial health.