Microsoft to lay off 268 Xbox employees and reorganize game studios

The current layoffs have affected developers at Halo Studios, the management apparatus of Xbox Game Studios, and other internal teams. In July 2026, the division had already cut 1,600 people, and overall the company plans to eliminate 3,200 jobs during the current fiscal year. According to Booty, taking into account asset sales, the business restructuring is roughly three-quarters complete.

As part of the changes, development of the next installment in the Halo series will be handed over to a new dedicated team within Activision that is not linked to the Call of Duty franchise. Rare and the World's Edge studio will also move under Activision's management. Meanwhile, Bethesda will take management control of Obsidian Entertainment while keeping its current projects, King will be merged with Microsoft Casual Games, and the Playground Games and Turn 10 studios will fully merge to work on the Forza and Fable franchises.

In addition, Microsoft announced the spin-off of Undead Labs, which, following Compulsion Games and Double Fine, will retain the rights to its games. Two attempts to sell Ninja Theory fell through, so the corporation is beginning a consultation process regarding a possible closure of the studio while continuing to seek alternative solutions. Consultations on the future of the French team Arkane will continue until the end of the year.