Microsoft is eliminating 268 Xbox roles while shifting development of the next Halo game to a new team inside Activision, according to an internal memo published by The Verge. The cuts span Halo Studios, other first-party studios, and Xbox Game Studios management and central functions.
Halo Studios will be reduced to a small team supporting the Halo community and games already on the market. Activision, meanwhile, is assembling a purpose-built group for the next Halo title. Xbox chief content officer Matt Booty said that team will be separate from Activision's ongoing Call of Duty development and plans, leaving the exact developers and production structure unannounced for now.
The transfer is a major change for a franchise that has remained under a dedicated Microsoft studio since the original developer, Bungie, split from the company. Halo Studios, formerly known as 343 Industries, had already gone through leadership changes, layoffs, and a move to Unreal Engine 5 before this restructuring.
Xbox is consolidating its studios
The Halo handoff is one part of a wider reorganization designed to operate fewer business units. Activision's remit now includes Rare and World's Edge, bringing the teams behind Sea of Thieves and Age of Empires into the same division. Insider Gaming's report also confirms that Obsidian is moving under Bethesda.
Obsidian will continue its existing projects, including Grounded, and work with Bethesda Game Studios on a new Fallout project. Playground Games and Turn 10 Studios will combine into one studio focused on Forza and Fable, while Microsoft Casual Games will move under King.
The Verge reports that this is Xbox's second layoff round of the year. Microsoft had previously said 3,200 roles would be affected during its 2027 fiscal year, which ends in June 2027. The latest cuts bring the reported total to nearly 1,900, and Booty's memo describes the broader restructuring as roughly three-quarters complete.
Ninja Theory faces a proposed closure
The same memo says two agreements involving Hellblade developer Ninja Theory fell through. Microsoft will begin consulting employees on a proposed closure while continuing to explore other options. That wording matters: the studio's shutdown is not yet described as complete. Consultation involving Arkane also remains underway and is expected to continue through the end of 2026.
Other studios have already left Microsoft's direct ownership. Compulsion Games and Double Fine returned to their management teams with their intellectual property, back catalogs, and operating funds. Undead Labs completed a similar transition and is expected to release State of Decay 3 with a new publisher while keeping its planned day-one Game Pass launch.
Activision president Rob Kostich said the company is building a dedicated Halo team rather than assigning the franchise to an existing Call of Duty group. For players, that means support for current Halo games stays with the smaller Halo Studios team while the franchise's next mainline chapter begins under a different Xbox division.
