Xbox Wants Faster Fallout and Elder Scrolls, Paid for by Layoffs

Xbox CEO Asha Sharma wants Bethesda moving faster on Fallout and The Elder Scrolls, and the money for that push is coming out of the same restructuring that just erased thousands of jobs. The Information reported in mid-June that Sharma had singled out the two franchises as “particular areas of focus,” with Microsoft leadership signing off on more spending for top-tier games starting this fiscal year. Three weeks later, Xbox confirmed roughly 3,200 job cuts and sent four studios out the door, and journalist Jason Schreier said on July 7 that The Elder Scrolls 6 is still “2 to 3 years away at least.”

Faster games would be good news for anyone who has waited since 2011 for a new Elder Scrolls. Microsoft still will not say whether Xbox stays the company that gets to ship them.

Sharma’s Bet: More Money for Bethesda, Less for Everyone Else

Sharma became Xbox CEO in February 2026 after Phil Spencer retired and Xbox president Sarah Bond resigned within the same week, having previously run Microsoft’s CoreAI division. A month later she used an X post to reveal the codename of Microsoft’s next console, Project Helix, promising it would lead in performance and play both Xbox and PC games. She had also reshuffled Xbox’s senior leadership ranks as the company raced toward that console.

By mid-June, The Information reported that Sharma was pushing Bethesda Game Studios and Halo Studios to move faster on Halo, Fallout and The Elder Scrolls, with the latter two named specific priorities. Microsoft CEO Satya Nadella and Chief Financial Officer Amy Hood signed off on spending more on top-tier games for the fiscal year that began this month, though the exact budget was not finalized.

There is a catch buried in that same reporting. The overall game development budget across Xbox’s portfolio is expected to stay flat for fiscal 2027. Money is being pulled from smaller or underperforming projects and redirected toward the franchises Sharma wants accelerated, rather than added on top of what already existed.

Eight Years Since That 36-Second Teaser

Bethesda first showed The Elder Scrolls VI at E3 in June 2018, a 36-second teaser with no gameplay. Eight years later, that is still essentially all fans have to go on.

Xbox’s chief content officer, Matt Booty, said earlier this year the game is “coming along well,” without offering a window. Todd Howard, the studio’s longtime director, has said there is “no rush,” pointing to the millions of players still active across Bethesda’s older titles.

The game formally entered active production in late 2023, after Starfield shipped. Xbox insider Jez Corden has placed a release between 2028 and 2029. Speaking at a Bloomberg Live event on July 7, Schreier put it at “2 to 3 years away at least,” a line that lands in the same window. Court records unsealed during the FTC’s case against Microsoft’s Activision Blizzard deal had earlier placed the game’s release during or after 2026, a target that has already come and gone.

How Bethesda’s Franchise Gaps Stack Up

Line up Xbox’s three flagship franchises and the pattern is obvious.

Halo is the outlier. Its last mainline entry landed only five years ago, and 343 Industries, now operating as Halo Studios, has spent that time rebuilding its reputation after Halo Infinite’s rocky post-launch reception.

What’s Confirmed and What Isn’t

The reporting on Sharma’s plan mixes hard news with details still sourced to unnamed insiders. It is worth separating the two.

What we know:

• Sharma’s July 6 memo confirmed roughly 3,200 job cuts through fiscal 2027, about half effective immediately, with four studios departing Xbox for new management.
• Nadella and Hood approved more spending on top-tier games for fiscal 2027, per The Information’s reporting.
• Sharma told staff Xbox’s margins run three to ten times lower than comparable platform and publishing businesses.

What’s unconfirmed:

• How much extra money actually reaches Bethesda and Halo Studios, since the figure has not been finalized or disclosed.
• Release windows for Elder Scrolls 6 or Fallout 5, since neither has an official date.
• Whether Microsoft restructures Xbox as a subsidiary, joint venture, or spins it off entirely, since no decision is described as imminent.

The Cuts Bankrolling the Acceleration

The reset arrived on July 6. In a memo posted to X, Sharma told staff plainly: “Our business today is not healthy.”

Our business today is not healthy.

Sharma wrote that line in an internal memo she posted directly to X, announcing the reductions herself rather than letting the news leak out. The cuts total about 3,200 positions through fiscal 2027, with roughly half gone immediately and four studios departing Xbox for new management. Microsoft’s broader workforce lost 4,800 jobs, about 2.1% of its total headcount, the same week, and Xbox alone is shedding roughly one-fifth of its own staff.

The same wave of cuts reached other Microsoft-owned studios. id Software, the Doom and Quake developer Microsoft owns through ZeniMax, lost 136 jobs as the layoffs gutted its engine team, trimming exactly the kind of technical staff that flagship projects lean on for tooling.

Sharma’s memo did not soften why. In a typical year, she wrote, Xbox “lost 64 cents for every dollar we invested” in the studios now being cut loose. Work at Xbox has also passed through as many as 14 layers of management, she said, a structure she wants trimmed down to three or five.

Todd Howard Still Isn’t in a Rush

Bethesda’s own leadership has not matched Sharma’s urgency. Howard has repeatedly declined to commit to a date for either game, and former staff describe a studio wary of repeating old mistakes.

Skyrim being one of the top 10 games of all time, how do you beat that?

Nate Purkeypile, a former Bethesda lead artist who worked on Skyrim, Fallout 4 and Starfield before leaving the studio in 2021, posed that question to Esports Insider. He also said Starfield’s repeated delays proved Bethesda has become “finally okay, actually delaying stuff,” which he called a healthy sign rather than a setback.

Reaction outside the studio has been just as skeptical. Josh Sawyer, who directed Fallout: New Vegas and remains at Microsoft-owned Obsidian Entertainment, has publicly cautioned against forcing new entries out faster. Others online framed the whole idea as a likely path to crunch, arguing that adding staff mid-project tends to slow games down through onboarding and scope creep rather than speeding them up.

Starfield is the cautionary tale everyone cites. Bethesda spent years and a large budget on that game, and the reception still fell short of Skyrim’s, evidence that money alone does not compress a Bethesda development cycle.

Would Xbox Even Still Own These Games in Five Years?

No decision is imminent, but Microsoft has not ruled out any option. The Information reported that executives are weighing three structural paths for Xbox, including turning it into a subsidiary like LinkedIn or GitHub, forming a joint venture with an outside partner, or spinning the division out entirely as its own public company.

• Wholly owned subsidiary – Xbox keeps its own leadership and brand under the Microsoft umbrella, the same setup already used for LinkedIn and GitHub.
• Joint venture – Microsoft brings in an outside partner to share ownership and cost, similar to the arrangement that paired Ubisoft with Tencent to create Vantage Studios.
• Full spin off – Xbox becomes an independent public company, separated from Microsoft’s balance sheet entirely.

Wall Street is not shy about which direction it prefers. DA Davidson analyst Gil Luria told CNBC that gaming “is not a business Microsoft needs to be in, or should be in,” adding that “it is very possible that they will spin it off at some point.” Microsoft’s stock has fallen 19% this year, trailing its megacap peers, while Xbox’s margins sit near 3%.

Former PlayStation boss Shuhei Yoshida offered a blunter read, predicting Xbox would eventually “dissolve” into Windows rather than survive as a standalone brand, a nod to Project Helix’s stated ambition to run both Xbox and PC games. That console is reported to drop the disc drive entirely, part of a broader pivot toward software and subscriptions that Sharma has already set in motion with Game Pass price cuts.

None of that has slowed Sharma’s public profile. Days after announcing the layoffs, she was named an adviser to the US Federal Reserve on jobs and productivity, even as Reddit threads tore into her stated goal of reaching a billion daily Xbox players as unrealistic.

Fallout fans are last in line regardless of how any of this shakes out. Howard has said for years that Fallout 5 will not enter full production until Elder Scrolls 6 ships, and Schreier’s July 7 estimate puts that game two to three years out at minimum. Do the math, and a new Fallout probably will not arrive much before the next decade.

Frequently Asked Questions

When Will The Elder Scrolls 6 Actually Come Out?

There is still no official release date, though estimates converge on 2028 or 2029. The game runs on Creation Engine 3, Bethesda’s newest in-house engine, and insider reporting says the studio is blending in some Unreal Engine tooling with help from The Coalition, the Gears of War studio, to help modernize production.

Is Fallout 5 Already in Development?

Bethesda has confirmed Fallout 5 is greenlit, though so far only as a one-page design document. Todd Howard has said full production will not begin until after Elder Scrolls 6 ships, and rumors point to Obsidian Entertainment, the Microsoft-owned studio behind Fallout: New Vegas, as a possible lead developer rather than Bethesda’s main team.

Will These New Bethesda Games Skip PlayStation?

It depends on the franchise. Xbox reversed course on Gears of War: E-Day to keep it console exclusive after first planning a PlayStation 5 version, and Forbes writer Paul Tassi has argued that making Elder Scrolls 6 or Fallout 5 Xbox only would be financially risky, since first-party sales tend to fall once games launch day one on Game Pass. Halo looks more likely to stay exclusive than the Bethesda RPGs.

Is Microsoft Actually Going to Sell Off Xbox?

No decision has been made, and Microsoft has not confirmed a timeline. Coverage of the same report varies in tone. Some outlets frame an eventual sale as the likely outcome, while Microsoft’s own language treats a subsidiary model, similar to LinkedIn and GitHub, as just one option among several still on the table.

What Other Franchises Are Getting Extra Investment?

Minecraft is one. Sharma reportedly wants to increase spending there as the game loses ground to Roblox among younger players. Forza Horizon and last year’s Elder Scrolls IV remake, Oblivion Remastered, are also cited internally as proof that Xbox’s established franchises still outsell newer bets, which is part of why leadership wants resources concentrated on fewer, proven names.

How Big Were Microsoft’s Layoffs Beyond Xbox?

Microsoft cut 4,800 jobs companywide on July 6, about 2.1% of its total workforce, with Xbox absorbing roughly one-fifth of its own staff in the same round. The cuts followed a separate voluntary retirement program launched in April for senior director level employees and below, which more than a third of eligible staff accepted before the layoffs were announced.