Microsoft cuts 268 jobs, shifts Halo franchise to Activision in major Xbox overhaul

Microsoft announced sweeping changes to its gaming division on September 22, eliminating 268 roles across Halo Studios, other first-party studios, and central management functions. The restructuring marks the latest phase of what Xbox CEO Asha Sharma described in July as "the most significant restructure in Xbox history," which has involved 3,600 planned job cuts overall.

The most significant change involves the Halo franchise, which will move from Halo Studios (formerly 343 Industries) to Activision, the Call of Duty developer that Microsoft acquired nearly three years ago. Halo Studios, which recently released Halo: Campaign Evolved in July 2026, will transition to a small support team focused on maintaining the existing player community and in-market games rather than developing new titles. Activision has stated it is "assembling a purpose-built team" to develop the next Halo game, with Activision President Rob Kostich saying the goal is to "make the greatest Halo game ever, worthy of its universe and legacy."

Beyond Halo, Microsoft is consolidating its studio structure by expanding Activision's oversight to include World's Edge (Age of Empires) and Rare (Sea of Thieves). Bethesda will expand to include Obsidian, and Playground Games and Turn 10 Studios will merge to focus on the Forza and Fable franchises. The company also announced that Undead Labs has successfully transitioned back to management ownership and will release State of Decay 3 on Game Pass.

Ninja Theory, the Cambridge-based developer behind the Hellblade franchise, remains in uncertain circumstances. Microsoft had announced plans to divest the studio in July but confirmed that two separate sale agreements have fallen through. The company is now beginning a consultation process with Ninja Theory employees regarding a proposed closure, while continuing to explore alternative paths forward. Arkane Studios, another affected studio, remains under consultation with outcomes expected by year's end.

Microsoft framed the restructuring as an effort to reduce operational independence among teams and align studios that work closely together. Matt Booty, Xbox's chief content officer, stated the company is "roughly three-quarters of the way through previously announced restructuring." The moves follow July layoffs that eliminated 1,600 jobs immediately, with additional reductions continuing through the current phase.