Microsoft Fast-Tracks Fallout & Elder Scrolls Amid Xbox Spin-Off

Microsoft has given the green light to massively accelerate development of its biggest gaming franchises, including Fallout and The Elder Scrolls, while quietly exploring the possibility of spinning Xbox off into its own separate company. According to a new report from The Information, this dramatic pivot pairs a massive cash injection for top-tier games. With a bleak corporate reality as the 25-year-old gaming brand fights to secure a highly profitable future under new leadership.

For gamers, the immediate silver lining of this corporate shakeup is an end to the agonizingly long waits between major releases. Following the massive global success of Amazon’s Fallout TV show, Microsoft CEO Satya Nadella and Chief Financial Officer Amy Hood have approved a plan by new Xbox CEO Asha Sharma to heavily increase spending on flagship franchises starting this July. While Bethesda hasn't released a mainline Fallout or Elder Scrolls game in over a decade, that drought is about to end. 

Xbox will now move much faster on Halo, Elder Scrolls, and Fallout. Currently, Fallout 5 is in pre-production, some unannounced Fallout projects are in the works, and leaks strongly indicate that Virtuos Studios is actively developing a Fallout 3 remaster. Meanwhile, Xbox leadership recently teased that The Elder Scrolls 6 is finally up and running and looks "amazing," nearly eight years after its initial announcement.

Weighing Long-Term Options and a Full Spin-Off

Behind the scenes, however, Microsoft is weighing some heavy long-term options to fix Xbox's underlying structural issues. Executives are reportedly considering restructuring the gaming division into a wholly-owned subsidiary, similar to how Microsoft currently operates LinkedIn and GitHub. They are also looking at forming a joint venture with outside partners or executing a full spin-off to separate Xbox into its own standalone company. 

While sources emphasize that there are no imminent restructuring plans, making Xbox a subsidiary would give the brand the autonomy to set its own budgets and strategies. And potentially make it much easier for Microsoft to sell the division off in the future if things don't improve, as per VGC. 

This potential reorganization comes at a highly turbulent time for Xbox, which has been weighed down by stalling Game Pass subscriptions and declining console sales. In a stark memo sent to staff on Wednesday, Sharma, who took over the division in February 2026, laid out the harsh realities the team must navigate during this "reset" period. 

She revealed that Xbox's annual revenue has dropped by nearly half a billion dollars over the last five years, hardware costs have quadrupled since last year, and the company's studio system has become severely overextended.

To course-correct, Microsoft is preparing to execute major layoffs and marketing cuts this coming July. It caps off a brutal week of news for Xbox, which includes rumors of impending studio closures to fix the overextended network. As Nadella plainly stated on The New York Times’ “Hard Fork” podcast, the stakes couldn't be higher: Microsoft simply has to turn Xbox into a sustainable business. By trimming the excess and pouring fresh cash directly into the blockbuster games players actually want, Xbox is hoping this aggressive pivot will be exactly what it needs to survive.