Microsoft Announces Major Xbox Restructuring With 268 Layoffs, Halo Moves to Activision, and Studio Closures
A sweeping new phase of Microsoft’s Xbox reset eliminates hundreds more jobs, hands the next Halo to Activision, merges studios, and pushes Ninja Theory toward closure.
Microsoft’s ongoing Xbox restructuring moved into a significant new phase on September 22, 2026, as the company unveiled another sweeping set of changes just days before the close of its fiscal first quarter on September 30. The announcements — delivered in a memo from Xbox Chief Content Officer Matt Booty — included a fresh wave of layoffs totaling 268 positions, a dramatic shift in who will develop the next Halo game, a series of studio consolidations, and troubling news for the UK-based developer Ninja Theory. Taken together, the moves confirm that the “reset” initiated by Xbox CEO Asha Sharma earlier in the year remains very much in progress, with more changes still expected before the process is complete.
New Round of Job Cuts Brings Xbox Closer to Restructuring Goal
The latest phase of the Xbox reset was confirmed in a statement by Xbox COO Matt Booty, with 268 roles being eliminated across Halo Studios, other first-party studios, and the Xbox Game Studios management and central functions layer. This latest round of cuts follows Microsoft’s decision to lay off 1,600 Xbox developers in July, including staff at studios it divested. According to Booty, the cumulative actions since July now bring Xbox roughly three-quarters of the way through its previously announced restructuring.
Beyond the layoffs announced at Xbox studios, it has been reported that Blizzard will face cuts next. An email sent to Blizzard employees by a senior leader indicates the World of Warcraft maker is not impacted by “today’s announcements,” though that careful phrasing does not rule out cuts in the future.
Xbox has laid off another 268 employees as part of the major reset it commenced in July 2026, when the company said it would be cutting 3,200 roles before the end of the fiscal year, starting with 1,600 layoffs across major studios such as Obsidian, ZeniMax Online Studios, and id Software. The total planned reduction represents approximately 20 percent of the Xbox division’s workforce.
Halo Franchise Development Transferred to Activision’s New Team
One of the most consequential announcements concerns the future of Microsoft’s flagship franchise. Activision will develop the next Halo title through a newly created team built specifically for the franchise, kept entirely separate from its ongoing Call of Duty development. A smaller group at Halo Studios will remain responsible for supporting the Halo community and games already on the market.
Activision’s responsibilities are expanding beyond Halo as well. Microsoft’s World’s Edge organization, which oversees Age of Empires, and Rare will now fall under Activision’s remit. Microsoft says the wider restructuring is designed to reduce the number of separate business units, place groups that already collaborate more closely together, and concentrate publishing expertise across fewer organizations.
Xbox CEO Asha Sharma called the broader restructuring effort the biggest in the history of the gaming unit when it was first announced in July, and the company now says that effort is about 75 percent complete. The goal, in corporate terms, is to cut costs and consolidate game studios under fewer publishers in order to return to growth and profitability.
Bethesda, King, and Forza Studios All Affected by Internal Consolidation
Beyond the Halo transition, a series of internal realignments are reshaping how Microsoft manages its portfolio of game studios. Bethesda is also gaining another major studio, as Obsidian Entertainment will move under Bethesda while continuing its existing projects, including Grounded and a new Fallout game being developed in collaboration with Bethesda Game Studios. On the casual gaming side, King, the developer of the juggernaut Candy Crush, will now cover Microsoft Casual Games, uniting two of Microsoft’s “global leaders in casual game design and live operations,” according to Booty.
Bethesda + Obsidian
Obsidian moves under Bethesda; Grounded and new Fallout remain in development.
King + Microsoft Casual
Candy Crush maker King absorbs Microsoft Casual Games, uniting two casual gaming leaders.
Activision Expands
Activision takes on Rare and World’s Edge in addition to leading next Halo development.
Playground + Turn 10
Both Forza studios merge into one unified team focused on Forza and Fable franchises.
Microsoft says the two Forza studios have already worked as creative and franchise partners for more than a decade, and the restructuring will now formally bring their work under one team. Forza has traditionally been split across Microsoft’s racing-focused studios, with Turn 10 responsible for the mainline Forza Motorsport series and Playground Games known for Forza Horizon, while Playground is also developing the next Fable game.
State of Decay 3 Secures New Publisher With Day-One Game Pass Commitment
Microsoft confirmed that Undead Labs, the developer of State of Decay 3, has found a “new publisher,” and the game will launch into Xbox Game Pass on day one whenever it is released. The identity of that publisher has not been disclosed. State of Decay 3 remains in development under the new arrangement and is scheduled for release on Xbox Series X|S, PC, cloud, Game Pass, Steam, and PlayStation 5.
Ninja Theory Faces Potential Closure After Sale Talks Collapse
Xbox’s announcement states that “two separate agreements” for Ninja Theory have fallen through, and that Xbox is now beginning consultation with employees for a proposed closure of the studio. While Booty states that Xbox is “continuing to explore other paths forward” for Ninja Theory, no other options are directly addressed.
Ninja Theory had been attempting to go independent following the restructuring announcement, even revealing its next project, Senua, at the Xbox Games Showcase earlier this year — a trailer that, according to reporting at the time, was shown primarily to attract investor interest during buyout negotiations. With no deal secured, the studio will now shut down unless an alternative path emerges during consultation.
Founded in March 2000, Ninja Theory is an England-based studio that first rose to prominence in the late 2000s with action-adventure titles like Heavenly Sword, Enslaved: Odyssey to the West, and DmC: Devil May Cry. Nowadays, Ninja Theory is likely best known for its Hellblade series, a Norse mythology-inspired duology that turned heads for its impactful subject matter, expert use of spatial audio, and cutting-edge visuals.
Arkane Lyon Remains in Consultation Under French Labor Law Requirements
As part of the Xbox Reset memorandum in July, Xbox announced that Arkane’s future was uncertain and that, in accordance with French law, the studio’s management was required to consult with its Works Council to review potential strategic options. Xbox says that consultation with Arkane remains underway and is expected to continue through the end of the year. There are no updates on what this means for Arkane’s Marvel’s Blade project.
At the upcoming October 6 town hall, Microsoft will come together as an all-Xbox team to reflect on progress and look ahead to what Booty described as one of the strongest game lineups in Xbox history. The announcements made on September 22 reflect a company still in active transformation, with additional changes expected before the restructuring is formally complete.
Asha Sharma’s Reset Agenda Reshapes Xbox’s First-Party Game Strategy
All of these changes are unfolding under the leadership of Asha Sharma, who succeeded Phil Spencer as Microsoft Gaming CEO in late February 2026, pledging a top-to-bottom review of the division in an effort to restore Xbox’s commercial standing. One of the first major decisions tied to that reset was announced on April 21, when Microsoft cut the monthly price of Xbox Game Pass Ultimate from $29.99 to $22.99 while ending day-one availability for new Call of Duty releases, which will now join the service after 12 months.
Sharma is reevaluating Xbox’s stance on exclusivity, windowing releases, and integrating AI, potentially reversing the trend of releasing first-party games widely on rival platforms. The restructuring announced on September 22, including mass layoffs, game development reassignments, and the potential closure of studios, reflects what Sharma has publicly framed as a necessary reset to position Xbox for long-term success.
What the Xbox Reset Means for the Road Ahead
The latest cuts represent the continuation of a larger effort by Xbox CEO Asha Sharma to cut costs and consolidate game studios under fewer publishers in an effort to return to growth and profitability. With 268 more roles eliminated, Halo’s future entrusted to Activision, two veteran studios absorbed into larger publishing arms, and Ninja Theory confronting what may be a permanent closure, Microsoft’s Xbox division now sits approximately three-quarters of the way through one of the most dramatic restructuring efforts in its history — and with further changes still to come before the process draws to a close, the full shape of the new Xbox has yet to fully reveal itself.
