Xbox has confirmed significant workforce reductions within several of its most prominent internal studios, including Obsidian Entertainment, id Software, and ZeniMax Online Studios. While none of these studios face closure, the deep cuts threaten their capacity to maintain current development plans and project schedules.
Obsidian Entertainment, known for titles like The Outer Worlds series and Grounded, reportedly lost around a quarter of its staff across all departments, including quality assurance, art, writing, programming, and production. Despite continuing development on Grounded 2 and new DLC for The Outer Worlds 2, insiders express concern over the studio’s ability to manage its ambitious slate with fewer personnel.
Meanwhile, id Software, the legendary developer behind DOOM and Quake, has also been hit hard. Reports suggest that most of its coding team has been let go, raising fears that id Software could be downgraded to a supporting role—likely assisting MachineGames with future entries in the DOOM, Quake, and Wolfenstein franchises. This marks a significant shift for a studio that has led development on its flagship games for years.
ZeniMax Online Studios, the developer of The Elder Scrolls Online (ESO), faces continuing challenges after earlier layoffs and the cancellation of Project Blackbird. These recent cuts have forced the studio to revise its previously announced 2026 roadmap for ESO. The studio emphasized its immediate focus on launching the upcoming Season One but acknowledged that future content schedules will be delayed while they reassess priorities and resources. The Elder Scrolls Online remains one of Microsoft’s top live-service games, and its success is central to Xbox’s strategy, yet it could not shield the studio from workforce reductions.
These layoffs follow a strategic reset under Xbox leadership seeking to restructure game development efforts across its portfolio. While no studio closures are planned, the cuts at Obsidian, id Software, and ZeniMax Online highlight the challenges Xbox faces in balancing ambitious expansion with tighter operational oversight.