Microsoft cuts 268 more Xbox roles and moves Halo to Activision as Ninja Theory faces closure

Microsoft's gaming division has spent the second half of 2026 moving from one restructuring announcement to the next, and on September 22 it added another. Matt Booty, Xbox chief content officer, published a memo titled Continuing Our Reset to Team Xbox employees around the world, confirming that 268 roles are being eliminated across Halo Studios, other first-party studios and the Xbox Game Studios management and central functions layer. The same memo redrew the internal map of Microsoft's studios, handed the Halo franchise to Activision, and opened a consultation that could end with the closure of Hellblade developer Ninja Theory.

That this arrived as a written memo rather than a surprise says a great deal about the year. Xbox CEO Asha Sharma announced in July that about 3,200 roles would be cut before the end of Microsoft's 2027 financial year, roughly 20 percent of the division, in what she described as the most significant restructure in Xbox history. Some 1,600 of those layoffs took effect immediately. Booty wrote that the actions completed since July, inclusive of the studio divestitures, bring the company roughly three-quarters of the way through the previously announced restructuring.

The divestitures have become a defining feature of the reset. Double Fine and Compulsion Games were allowed to return to management in August, keeping their intellectual property, back catalogs and runway funding. Undead Labs has now transitioned on similar terms and, with a new publisher, will release State of Decay 3 on Game Pass on day one. Two separate agreements to sell Ninja Theory, however, fell through, which is why Microsoft is beginning a consultation with employees on a proposed closure while it continues to explore other paths forward.

Elsewhere the consolidation is thorough. Bethesda expands its remit to include Obsidian Entertainment, which continues to work on Grounded and a new Fallout project with Bethesda Game Studios. King expands to include Microsoft Casual Games. Playground Games and Turn 10 Studios, partners for more than a decade, will come together as a single studio focused on the Forza and Fable franchises. Activision, which Microsoft acquired in 2023 for 68.7 billion dollars, takes on Rare, World's Edge and the next Halo title.

Key Facts

The headline number is 268 roles. Xbox Wire reported on September 22 that the cuts span Halo Studios, other first-party studios and the Xbox Game Studios management and central functions layer. GeekWire reported on September 23 that Microsoft's total reductions that week numbered fewer than 600 globally, about 300 of them in Washington state, with the wider cuts reaching cloud, artificial intelligence, marketing and research teams well beyond gaming.

The restructuring timetable runs to June 2027. The 3,200 roles previously confirmed amount to roughly 20 percent of the Xbox division, and 1,600 of the layoffs took effect in July 2026. Eurogamer reported on September 22 that the process is now about three-quarters complete and that more than 1,300 employees could still face layoffs before it finishes.

Studio ownership has changed hands on a large scale. Rare, founded in 1985 and part of Xbox since 2002, now sits inside Activision, as does the Age of Empires studio World's Edge. GamesIndustry.biz reported on September 22 that the next Halo game will be led by a new, purpose-built team that is separate from ongoing development and plans for Call of Duty, while a small team at Halo Studios continues supporting the Halo community and games in market. Halo Studios launched as 343 Industries in 2007, rebranded in 2024 and shipped Halo: Campaign Evolved in July 2026.

Ninja Theory, the Cambridge developer behind Hellblade and its Senua saga, faces a proposed closure. The Verge reported on September 22 that Microsoft is proceeding with a consultation period to close the studio unless another buyer is found. Arkane remains in consultation under French labor law, a process expected to continue through the end of the year, with no announced outcome for its Blade project.

Two further details frame the announcement. Rob Kostich, president of Activision, said the company is thrilled to welcome Halo, Rare and World's Edge, and that for Halo the goal is clear, to make the greatest Halo game ever, worthy of its universe and legacy. An all-Xbox town hall is scheduled for October 6, 2026, and Booty said he will spend time with studios over the week that follows the memo.

Analysis

The bigger picture here is that Microsoft has stopped running Xbox as a collection of independent creative studios and started running it as a portfolio of franchises distributed among a few large publishers. Booty described the aim as strengthening franchises and games by operating fewer business units, which is a corporate way of saying that brand management now outranks studio autonomy inside the division.

Placing Halo with Activision is the clearest expression of that shift. Activision already operates Call of Duty as a large scale production machine, and Microsoft is betting that the same publisher discipline can steady a franchise that has cycled through studios and reboots for years. The new Halo team is deliberately kept separate from Call of Duty, which suggests Microsoft wants the brand to retain its own identity while inheriting Activision's resources and release planning.

The contrasts inside the memo are just as telling. Obsidian Entertainment, a studio with a strong role-playing pedigree, is folded into Bethesda, which shares that heritage and already works with it on Grounded and a Fallout project. Playground Games and Turn 10 Studios are merged around racing and the Fable revival, two franchises that benefit from shared technology. At the other end, four studios have left or are leaving the group entirely, and Ninja Theory may follow, which shows that Microsoft is willing to part with teams whose output it no longer treats as central.

The financial framing explains the timing. Microsoft spent 68.7 billion dollars to acquire Activision in 2023, and the current reset is aimed squarely at returning the division to growth and profitability. Eliminating 3,200 roles, roughly a fifth of the workforce, is not a minor adjustment. It is an attempt to shrink the cost base of a business that grew rapidly through acquisition while its release schedule struggled to keep pace with that expansion.

Why It Matters

The human cost is immediate and unevenly distributed. Roughly 1,600 people lost their jobs in July and another 268 are going now, with Eurogamer noting that more than 1,300 employees could still be affected before the process ends. The studios involved are spread across the United Kingdom and the United States, from Rare's long established base to Ninja Theory in Cambridge and Halo Studios in Redmond, so the effects will be felt in several local development communities at once.

For players, the more consequential change is custodianship. Halo has been the flagship of Microsoft's console business for a generation, and Rare has been part of Xbox since 2002. Both now sit with the publisher Microsoft bought for 68.7 billion dollars, and the first visible result of that arrangement will be how the next Halo game is built. Undead Labs offers the counterexample, since State of Decay 3 will still arrive on Game Pass on day one despite the studio leaving Microsoft, which shows that the platform relationship can survive a divestiture.

The broader significance is about what a large acquisition actually delivers. Microsoft bought Activision to add Call of Duty and mobile revenue, and it is now using that purchase to absorb Halo, Rare and World's Edge. Consolidation inside the buyer, rather than growth in the acquired business, has become the organising principle of the deal's later chapters, and other publishers watching the same cost pressures will note how far the logic was taken.

Next Up

Attention now turns to the consultations that remain open. The Ninja Theory process begins with a proposed closure, and Microsoft says it is still exploring other paths forward, which leaves room for a buyer to emerge. The Arkane consultation under French labor law is expected to continue through the end of the year with no announced outcome for its Blade project.

Inside the company the calendar is already set. Booty said he will spend the coming week with studios, and an all-Xbox town hall is scheduled for October 6, 2026. The restructuring itself is roughly three-quarters finished, with the remaining reductions due before the end of Microsoft's 2027 financial year in June 2027, so further announcements are more likely than not.