Microsoft's Xbox division is implementing a major workforce reduction of 3,200 employees by the end of the 2027 financial year, affecting multiple development studios under the ZeniMax umbrella, which encompasses major Bethesda operations. The restructuring has already prompted some studios to pursue independence, including Undead Labs and Compulsion Games, as the gaming division navigates shifting business priorities and market pressures.

The cuts are occurring in waves, with additional layoffs of approximately 1,600 positions anticipated in 2027. Blizzard Entertainment has initially avoided the first round of reductions, though uncertainty remains about whether the studio will be affected in subsequent phases of the broader restructuring initiative.