Microsoft Layoffs 2026: Full List of Studios Hit — Bethesda, id Software, and What Severance They're Getting

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Microsoft announced roughly 4,800 layoffs on July 6, 2026 — about 2.1% of its global workforce — and the Xbox gaming division is taking the biggest hit: 3,200 roles cut through fiscal 2027, with 1,600 eliminated immediately, according to CNBC and Variety. The cuts reach far beyond gaming into commercial sales and consulting, but the names dominating searches are the game studios: Bethesda Game Studios, id Software, Obsidian Entertainment and ZeniMax Online Studios were all hit hard, per reporting from Ars Technica, Aftermath and PC Gamer. Here is the full list of affected studios and teams, plus the exact severance terms Business Insider says laid-off US workers are getting.

Which Studios Were Affected by the Microsoft Layoffs? The Full List

New Xbox CEO Asha Sharma called it "the most significant restructure in Xbox history" in her Resetting Xbox memo. Studio by studio, here is what has been reported so far:

• id Software (Doom): The hardest hit. Roughly half the studio is gone — about 90 union bargaining-unit members plus several managers, current employees told Aftermath. Reports say most of the studio's coders were cut.
• Bethesda Game Studios (Elder Scrolls, Fallout, Starfield): Around 35 staff laid off per former project lead Jeff Gardiner, with more than 50 employees publicly announcing job losses on day one. Bethesda leadership says the company must now focus on its "strongest franchises," per GamesRadar.
• ZeniMax Online Studios (The Elder Scrolls Online): Deep cuts, with some teams reportedly halved or more. Longtime ESO game director Rich Lambert was among those laid off, per Massively Overpowered.
• Obsidian Entertainment (The Outer Worlds, Avowed): Losing about 25% of its staff, per Aftermath.
• Compulsion Games and Double Fine: Not layoffs but exits — both studios are being returned to their management teams and will become independent again, taking their catalogs with them, per Variety.
• Ninja Theory and Undead Labs: Being sold to unnamed buyers. Undead Labs, roughly 110 people working on State of Decay 3, is under review, per Variety and IBTimes.
• Arkane Lyon (Dishonored, Deathloop): Reportedly facing closure, pending a consultation period required by French labor law.
• Blizzard Entertainment: Largely spared for now, though its China-based operations were affected, per Aftermath.

Outside gaming, TechCrunch reports the remaining ~1,600 cuts landed in commercial sales and consulting. In Washington state alone, 605 workers received notices with a September 4 separation date. One striking stat from TheGamer: about 32% of the studios acquired during Phil Spencer's tenure have now been closed, sold or spun out.

Microsoft Layoffs Severance: What Laid-Off Workers Are Getting

Per Business Insider's reporting on the internal terms for affected US employees:

• Pay: Employees at levels 65–67 receive two weeks of base pay for every six months worked.
• Stock: Continued vesting for six or 12 months (levels 67 and below), depending on years of service.
• Health care: Six months of paid health insurance, plus the option to continue coverage through COBRA for another 12 months.

Business Insider notes the terms broadly mirror Microsoft's Voluntary Retirement Program from earlier this year, though with a shorter paid health-insurance window.

Why Is Microsoft Laying Off Employees? The AI Restructuring Behind It

Sharma's memo pointed the finger at overexpansion: "We simply spread ourselves too thin," she wrote, noting Xbox's platform teams are 40% larger than at the start of this console generation even as player numbers and playtime declined, per PC Gamer.

But the timing tells a bigger story: Microsoft is aggressively cutting AI costs across the company. Bloomberg and Yahoo Finance reported this week that Microsoft has begun replacing OpenAI and Anthropic models with its own in-house MAI models inside Excel and Outlook, handling tens of thousands of prompts a week. AI chief Mustafa Suleyman said it plainly in June: "We pay a lot of money to Anthropic — so our goal is to reduce and ultimately eliminate that cost." The same margin pressure driving the model swap — enormous AI infrastructure spending — is squeezing headcount everywhere else. The scale of that AI buildout is reshaping whole industries; see our TeraWulf-Anthropic data center story for how far the spending spree reaches.

What It Means for Games: Delays and Cancellations

Microsoft says no publicly announced first-party games are being canceled as part of the cuts. However, reports tied to Arkane Lyon's potential closure say Marvel's Blade — already delayed from 2026 to late 2027 — faces outright cancellation. The future content pipeline for The Elder Scrolls Online is described as "in flux" after ZeniMax Online's cuts, and id Software losing most of its coders raises real questions about Doom's engine and content cadence. On the flip side, Sharma's memo names Minecraft and The Elder Scrolls as priority growth franchises getting reallocated teams and funding.

What Happens Next

Only half the Xbox cuts have landed — roughly 1,600 more roles will be eliminated over the next 12 months as fiscal 2027 unfolds, so more studio-level news is likely. The Communication Workers of America-affiliated unions at ZeniMax and Blizzard have promised "all necessary legal and contractual action" for laid-off members, and Arkane Lyon's fate won't be final until the French consultation process concludes. Buyers for Ninja Theory and Undead Labs have not yet been named. We'll update this list as each studio's status is confirmed.

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