Microsoft to Cut 268 Xbox Jobs and Reorganize Game Studios

Microsoft is laying off 268 employees from its Xbox division and conducting a major reorganization of its internal teams. This was announced by Matt Booty, the head of Xbox game content, in an internal letter to employees.

The current layoffs have affected developers from Halo Studios, the Xbox Game Studios management team, and other internal teams. In July 2026, the division had already cut 1,600 jobs, and the company plans to eliminate 3,200 positions in total during the current financial year. According to Booty, with the sale of assets, the business restructuring is about three-quarters complete.

As part of the changes, development of the next installment in the Halo series will be handed over to a new specialized team within Activision, unrelated to the Call of Duty franchise. Rare and World's Edge studio will also come under Activision's management. At the same time, Bethesda will take over Obsidian Entertainment, preserving its current projects, King will be merged with Microsoft Casual Games, and Playground Games and Turn 10 studios will finally merge to work on the Forza and Fable series.

Additionally, Microsoft has announced the separation of Undead Labs, which, like Compulsion Games and Double Fine, will retain the rights to its games. Two attempts to sell Ninja Theory have failed, so the corporation is starting a consultation process on the possible closure of the studio, while continuing to seek other solutions. Consultations on the future of the French team Arkane will last until the end of the year.