Microsoft’s Xbox division is preparing for a second wave of layoffs that will hit hundreds more workers, according to reporting from Neowin. The cuts are aimed at the publishing and studio side of the business — the Xbox second layoff wave — with Bethesda and Activision among the targeted areas.
What stands out is the scale of the restructuring. Microsoft is reportedly flattening a management hierarchy that previously spanned as many as 14 layers, trimming the middle-management structure that once ran through these studios.
What We Know About the Xbox Second Layoff Wave
The second layoff wave is targeting the publishing and studio arms rather than the consumer-facing services that most gamers interact with. This means the cuts are focused on the companies that develop and release games — the studios behind the franchises — rather than the storefronts, consoles, or subscription services themselves.
By flattening a management hierarchy that reportedly reached 14 layers deep, Microsoft is removing a large swath of middle management. In practice, this translates to fewer layers of oversight between studio leadership and the top of the organization, which can reshape how decisions are made and how studios are run day to day.
Which studios are in the crosshairs?
Bethesda and Activision are named as the primary targets in this round of cuts. Both are major publishing and studio arms that Microsoft absorbed through its larger gaming expansion. Bethesda is known for franchises like The Elder Scrolls and Doom, while Activision brings Call of Duty, Overwatch, and a deep catalog of studio holdings under its umbrella.
The emphasis on publishing and studio arms suggests Microsoft is consolidating control over game development itself, rather than just distribution. For staff at these studios, this is a meaningful shift — the roles most at risk are those tied to publishing operations, editorial, and studio management rather than the broader Xbox consumer business.
How does this compare to the first wave?
Calling this a “second” wave implies that a first round of cuts already happened, though the specifics of that earlier restructuring aren’t fully detailed in the current reporting. What is clear is that Microsoft has been restructuring its gaming division for some time, particularly after the high-profile acquisition of Activision Blizzard.
That acquisition, which closed in 2023 after a lengthy regulatory fight, brought a large portfolio of studios and publishing assets into the Microsoft fold. The integration has been bumpy, and observers have watched Microsoft consolidate power under Phil Spencer, the head of Xbox who has been centralizing control over the gaming empire.
What this means for you
For the average gamer, the immediate impact is likely limited. The cuts are aimed at internal publishing and studio management, not the storefronts or subscription services you actually use. Your Game Pass library, your console, and your game purchases should remain unaffected in the short term.
That said, the longer-term implications are worth watching. Restructuring at the studio level can affect development timelines, staffing on upcoming titles, and how much attention Microsoft can devote to supporting its franchises. If you’re waiting for news on a game you’re excited about, this is a period where you should expect quieter development cycles and fewer announcements.
How to stay informed
Until Microsoft issues official confirmation, the details remain in the realm of reporting rather than official statements. Keep an eye on the Windows Insider Blog and Microsoft’s official gaming announcements for any formal restructuring updates. For IT and enterprise readers, this story is mostly a business-operations matter rather than a technical one, so your Windows machines and licensing won’t be directly affected.
For gamers and industry watchers, following reputable tech outlets like Neowin will give you the most current details as the picture develops. The flattening of a 14-layer management hierarchy is the kind of structural change that ripples through a studio for years, so this story is likely to evolve.
Source: Neowin
Over to you: Will Bethesda and Activision staff see the flattening as a leaner operation, or a sign of deeper trouble for Microsoft’s gaming empire?
