Xbox Lay Offs Continue With 268 Employees Cut; Activision to Develop Next ‘Halo’ Game as Part of Studio Reorg
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Xbox has eliminated a further 268 roles as part of its restructuring, with cuts affecting Halo Studios, other first-party teams, and central management functions. Concurrently, the company has reorganised its studio structure, most notably placing Activision in charge of Halo development through a dedicated team separate from Call of Duty production. These moves represent progress towards the larger restructuring plan announced by new Xbox CEO Asha Sharma in July.
The completed actions bring Xbox roughly three-quarters of the way through its planned reduction of up to 3,200 employees (20% of total staff) over the next year. Beyond the Halo handover to Activision, other studio changes include Bethesda absorbing Obsidian, King combining with Microsoft Casual Games, and Playground merging with Turn 10 to focus on Forza and Fable franchises. In divestiture updates, Undead Labs has successfully transitioned with a new publisher partner for State of Decay 3, whilst negotiations with Ninja Theory have stalled with a proposed closure being explored, and consultations with French studio Arkane are ongoing through the end of the year.
- Xbox cuts 268 roles, shifts Halo development to Activision with purpose-built team
- Restructuring on track to complete three-quarters of 3,200-person workforce reduction plan
- Ninja Theory faces proposed closure; Arkane talks ongoing through year-end
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Xbox is Microsoft's gaming division, which develops and publishes video games and owns numerous game studios that create popular titles. Games are a major part of Microsoft's business, reaching hundreds of millions of players worldwide. The company's game franchises include some of the most successful and recognisable titles in the industry.
The new chief executive of Xbox, Asha Sharma, announced a major restructuring plan in July that goes beyond simple cost-cutting. The plan involves reorganising which studios develop which games, consolidating some teams, and divesting or closing others. This represents a significant strategic shift in how Microsoft wants to manage its collection of game studios and franchises moving forward.
As part of this restructuring, major franchise responsibilities are being reassigned and studios are being reorganised into new configurations. The changes are reshaping the internal structure of Microsoft's gaming operations to align with Sharma's new strategic direction for the division. These moves affect some of Xbox's most prominent games and its most established studios.
Full account
Microsoft's Xbox division has announced a further round of workforce reductions, with 268 positions eliminated across the organisation this week. According to a memo distributed by Matt Booty, the division's chief content officer, the cuts affect Halo Studios, multiple first-party development teams, and the central management infrastructure. This latest reduction forms part of a broader restructuring programme disclosed in July, which aims to eliminate 3,200 positions—representing one-fifth of the division's total workforce—over the course of a year. The company has now completed approximately three-quarters of these planned reductions.
Alongside the redundancies, Xbox has undertaken a significant restructuring of its studio operations. Bethesda Entertainment has integrated Obsidian into its fold, whilst King, the developer behind Candy Crush, is absorbing Microsoft Casual Games. The racing specialists Playground and Turn 10 are merging into a unified studio focused on the Forza and Fable properties. For Halo Studios, a small team will continue providing support for the franchise's existing games and community engagement, though the studio's primary development responsibilities have been substantially curtailed.
The most significant strategic shift has seen Activision assume leadership over the development of the forthcoming Halo title, in addition to taking responsibility for the World's Edge studio and Rare. Activision has signalled that the next Halo instalment will constitute a major, core-series entry developed by a purpose-built team operating separately from its Call of Duty division. This represents a considerable departure from previous arrangements; the franchise was originally created by Bungie before passing to Microsoft's 343 Industries, latterly known as Halo Studios.
Separately, Xbox has advanced with earlier-announced studio divestments. Compulsion Games and Double Fine Productions were spun out as independent entities in August, each retaining intellectual property ownership and securing funding reserves. Undead Labs has similarly achieved independent status and will release State of Decay 3 through a new external publisher on Game Pass day-one, subsequently launching on PlayStation. Ninja Theory's situation remains precarious following the failure of two proposed acquisition arrangements; whilst potential closure has been flagged, Xbox indicated it continues investigating alternative outcomes. Arkane Studios in Lyon remains subject to a consultation period mandated by French employment law, with discussions anticipated to conclude by the end of 2026.
Where outlets differ
Source 2 explicitly identifies cost efficiency and profit margin enhancement as drivers for the restructuring; other sources present it primarily as operational consolidation.
Source 4 positions Activision's assumption of Halo development as the day's major consumer-facing announcement and provides historical context on the franchise's prior development; other sources treat it as one reorganisational change among several.
Source 4 specifies the forthcoming Halo game as a 'full-feature, mainline installment'; sources 1 and 2 do not characterise its scope in such terms.
Source 2 emphasises Ninja Theory's closure risk prominently in its headline and opening, includes a direct statement from Undead Labs leadership, and provides greater detail on divestiture terms (IP retention, runway funding); other sources address these matters more briefly.
Source 2 notes State of Decay 3 will launch on PlayStation in addition to Xbox and PC; other sources do not mention the multiplatform aspect explicitly.
More coverage
- Engadget — Xbox 'reset' continues with 268 job cuts and Activision making the next Halo game
- PC Gamer — Xbox lays off 268 more employees, merges Obsidian into Bethesda, and puts Activision in charge of Halo
- The Hollywood Reporter — More Xbox Layoffs Hit as Massive Reorg Continues; Activision to Make Next ‘Halo’ Game
- GamesRadar+ — Activision prepares to "make the greatest Halo game ever" as it takes control of the franchise
- Push Square — Xbox Confirms Job Losses and Studio Changes, Activision to Make Next Halo Game