Xbox cuts 268 more jobs, shifts next Halo game to Activision as restructuring nears completion

Microsoft's Xbox division cut another 268 jobs this week and handed development of the next mainline "Halo" game to Activision, as the company works through what its leadership has called the most significant restructuring in Xbox's history.

Xbox Chief Content Officer Matt Booty disclosed the cuts Tuesday in a staff memo and an Xbox Wire post titled "Continuing Our Reset", saying the reductions fall across Halo Studios, other first-party teams and management layers within Xbox Game Studios, and bring the division roughly three-quarters of the way through the restructuring plan Microsoft announced in July.

What happened

Halo Studios — the team formerly known as 343 Industries, based in Redmond — is being sharply reduced to a small group that will keep supporting existing Halo games, while development of the next mainline entry in the franchise moves to Activision, the Call of Duty publisher Microsoft acquired in 2023, under a newly assembled team separate from the Call of Duty studio. Booty's post also reshuffled which studios sit under which publishing umbrella: Activision additionally absorbs World's Edge, maker of Age of Empires, and Rare, maker of Sea of Thieves; Bethesda takes on Obsidian Entertainment, which continues work on Grounded and a new Fallout project alongside Bethesda Game Studios; King, the mobile publisher behind Candy Crush, absorbs Microsoft's casual-games unit; and Playground Games and Turn 10 Studios are merging into a single studio focused on the Forza and Fable franchises.

Not every studio in the reset is being folded in. Compulsion Games, Double Fine and Undead Labs have all been spun back out to independent ownership along with their intellectual property and funding, with Undead Labs' State of Decay 3 still on track to launch day-one on Game Pass. Two separate attempts to spin off Ninja Theory, the British studio behind Hellblade, fell through, and Microsoft has begun consultation on closing it. A decision on divesting Arkane Studios' French office is still pending and expected by the end of the year. "Today, our focus should be on supporting those affected and treating one another with care," Booty wrote.

The numbers

The cuts build on the restructuring Xbox Chief Executive Asha Sharma announced in July, which eliminated 1,600 roles immediately as part of a plan to cut about 3,200 positions — roughly a fifth of the division's workforce — by the end of Microsoft's 2027 fiscal year, alongside a wave of studio divestitures. "We must reset Xbox," Sharma wrote in that memo. "Our business today is not healthy," citing profit margins she said were three to ten times lower than comparable platform and publishing businesses. This week's 268 cuts bring the total restructuring to roughly 75 percent complete against that 3,200-job target.

"We must reset Xbox. Our business today is not healthy." — Xbox CEO Asha Sharma, in the July memo announcing the broader restructuring

How we got here

Sharma took over as chief executive of Microsoft Gaming on February 20, replacing Phil Spencer after his retirement, in a move that passed over longtime Xbox executive Sarah Bond for the top job. The reorganization effectively completes the integration of Xbox's first-party studios under the publishing structure Microsoft built with its roughly $69 billion acquisition of Activision Blizzard, which Microsoft told regulators it had completed in an October 2023 securities filing — folding franchises like Halo, Age of Empires and Sea of Thieves under Activision's and Bethesda's operational umbrellas rather than keeping them under a standalone Xbox Game Studios structure.

Who is affected

Beyond the Halo Studios employees and management staff let go this week, the restructuring's next flashpoints are Ninja Theory, where a closure consultation is now underway, and Arkane's French studio, where employees are waiting on a divestiture decision due by year's end. For players, the practical effect is a shift in which internal teams are responsible for beloved franchises: the next Halo game will now carry an Activision imprint rather than being built by the studio — formerly known as 343 Industries — that Microsoft formed to take over the franchise after original developer Bungie became independent in the late 2000s. The Playground Games–Turn 10 merger similarly consolidates two of Xbox's most prominent racing-game teams, Forza Horizon's and Forza Motorsport's respective developers, into a single studio also expected to carry forward the long-dormant Fable franchise, whose most recent reboot has faced repeated delays.

The changes also ripple outward to the games themselves: Sea of Thieves and Age of Empires, previously run as pure first-party Xbox Game Studios titles, will now operate under Rare's and World's Edge's new reporting lines inside Activision, and Grounded and the in-development Fallout project move fully into Bethesda's orbit alongside Obsidian.

What happens next

Microsoft has said it expects the reset to return the gaming division to growth in its 2027 fiscal year, and investors will be watching upcoming quarterly disclosures for signs that profit margins in the gaming segment are recovering. The Arkane consultation is due to conclude by the end of 2026, and the fate of Ninja Theory's staff will become clearer as that closure process plays out. For now, Xbox has signaled no further job-cut announcements are imminent, though the division has said as much before earlier phases of the same restructuring. Booty's post framed the remaining work as largely organizational rather than another round of workforce reductions, pointing staff toward an upcoming game lineup the company has repeatedly promised will be among the strongest in Xbox's history.