XBOX Cuts 268 Jobs as Activision Takes Over Massive Halo Development

Microsoft has confirmed another painful round of XBOX cuts, but the job losses are only part of a much larger gaming shake-up.

XBOX is eliminating 268 roles across Halo Studios, other first-party studios, XBOX Game Studios management, and central support teams. At the same time, Microsoft is moving Halo development to Activision, combining several well-known studios, and beginning consultation on the possible closure of Hellblade developer Ninja Theory.

This is not a minor reshuffle. It changes who controls some of Microsoft’s most recognizable gaming franchises and leaves more uncertainty hanging over the people building them.

XBOX cuts another 268 jobs

XBOX chief content officer Matt Booty announced the changes in an internal memo published by XBOX Wire.

Booty said Microsoft is eliminating 268 positions across Halo Studios, other first-party developers, XBOX Game Studios management, and what he described as the “central functions layer.”

The cuts are part of the broader XBOX reset announced earlier in 2026. According to Booty, actions completed since July—including studio divestitures—have brought XBOX roughly three-quarters of the way through its previously announced restructuring.

MSFT News Now readers will remember that Microsoft had already warned that major changes were coming. Our earlier coverage of the XBOX reset and its first 100 days examined the pressure facing hardware, Game Pass, profitability, and the company’s studio structure.

The latest announcement shows that the reset is still far from finished.

Activision will develop the next Halo

The biggest consumer-facing news is that Activision will develop the next mainline Halo game.

Microsoft is creating a purpose-built Activision team for Halo that will remain separate from Call of Duty’s current development and planning. A smaller group at Halo Studios—the developer formerly known as 343 Industries—will stay in place to support the Halo community and games already on the market.

Activision president Rob Kostich said the company wants to build “the greatest Halo game ever” while respecting the elements that made the series popular in the first place. That is an enormous promise for a franchise that helped define the original XBOX and remains closely tied to Microsoft’s gaming identity.

Activision is not simply taking over one project. Its responsibilities will now expand to include Rare and World’s Edge, the teams associated with franchises including Sea of Thieves and Age of Empires.

The move gives Activision a much larger role inside Microsoft Gaming. Following Microsoft’s acquisition of Activision Blizzard, the Call of Duty publisher is now becoming a central home for several of XBOX’s longest-running properties.

For a look at the games Microsoft was promoting before this restructuring, see our XBOX Games Showcase 2026 recap, which included Halo: Campaign Evolved and other major first-party releases.

Halo Studios will become much smaller

Halo Studios will continue to exist, but its role is changing dramatically.

Booty’s memo says a small team will remain to support the Halo community and games currently in the market. New mainline development, however, will move to the purpose-built team at Activision.

That creates obvious questions about how much creative control Halo Studios will retain and whether it will contribute to future projects beyond support responsibilities. Microsoft has not yet identified the leaders or developers joining Activision’s new Halo group.

The next game is described as a mainline Halo installment rather than a small side project. That makes Activision’s new team responsible for one of the most important releases in XBOX’s future lineup.

Ninja Theory faces possible closure

The outlook is even more uncertain for Ninja Theory, the studio behind Hellblade and Senua’s Saga: Hellblade II.

Booty told employees that two separate agreements involving Ninja Theory had fallen through. XBOX will now begin consulting employees on a proposed closure while continuing to explore other options.

That wording matters. Microsoft has not said Ninja Theory is officially closed, but the proposed closure places the studio and its employees in a deeply uncertain position.

Consultation involving Arkane is also continuing and is expected to last through the end of 2026. Microsoft did not announce a final outcome for Arkane in the memo.

The situation echoes earlier XBOX layoffs that led to studio closures and canceled games. Our coverage of the 2025 XBOX layoffs, The Initiative closure, and Perfect Dark cancellation offers additional context for how quickly Microsoft’s first-party portfolio has changed.

Microsoft reorganizes its remaining studios

Several other XBOX studios are moving into larger operating groups:

• Bethesda will add Obsidian, which will continue working on Grounded and a new Fallout project with Bethesda Game Studios.
• King will take responsibility for Microsoft Casual Games, bringing Candy Crush, Solitaire, and other casual properties into one organization.
• Playground Games and Turn 10 will combine into a single studio focused on the Forza and Fable franchises.
• Activision will add Rare and World’s Edge alongside its new Halo responsibilities.

Booty said the goal is to operate fewer business units, group teams that already work closely together, and concentrate XBOX’s publishing expertise.

There are also major ownership changes. Compulsion Games and Double Fine previously returned to their management teams with their intellectual property, back catalogs, and operating funding. Undead Labs has now completed a similar transition and will release State of Decay 3 through a new publisher while keeping its planned day-one Game Pass release.

These arrangements allow Microsoft to reduce the number of studios it directly operates without necessarily canceling every game or removing every project from Game Pass.

What this means for XBOX players

For players, the immediate XBOX experience is unlikely to change overnight. Existing games will remain available, and the affected studios still have active projects and support commitments.

The long-term picture is much more complicated.

Moving Halo to Activision could give the franchise access to a publisher with enormous experience producing and marketing blockbuster shooters. It could also worry fans who fear that Microsoft is consolidating too much creative control inside a smaller number of organizations.

Combining Playground and Turn 10 may improve coordination across Forza, but it also ends the longstanding separation between the Horizon and Motorsport teams. Moving Obsidian under Bethesda makes sense for a studio working on Fallout, though fans will want reassurance that Obsidian can keep its own identity.

The human cost should not disappear behind the franchise headlines. Another 268 people are losing their jobs, including employees who helped build and support some of Microsoft’s best-known games.

Microsoft has also confirmed that the restructuring is only about three-quarters complete. More changes may still be coming before the XBOX reset is finished.

XBOX has entered a new era

Microsoft spent years expanding XBOX through acquisitions. It is now simplifying that structure, spinning studios out, merging teams, cutting jobs, and placing more franchises under Activision, Bethesda, and King.

Activision developing Halo would have sounded almost impossible before Microsoft purchased Activision Blizzard. It is now the centerpiece of XBOX’s latest overhaul.

The next major milestone will be XBOX’s October 6 company town hall, where leadership plans to discuss the reset and the gaming division’s upcoming lineup. Until then, the biggest questions concern the future of Ninja Theory and Arkane, the shape of Activision’s Halo team, and how many more jobs could disappear before the restructuring ends.