Microsoft has announced another sweeping restructuring of its Xbox division, eliminating 268 roles across Halo Studios, first-party teams, and Xbox Game Studios management. The changes, revealed on September 22, 2026, are part of a broader reset led by new Xbox CEO Asha Sharma, who has set a goal of reaching more than a billion people each day.
The cuts follow 1,600 layoffs in July, with an additional 1,600 planned over the following fiscal year, bringing the total number of workers impacted by the planned reductions to 3,200. The reorganization reshapes how Microsoft’s gaming properties are managed, moving several studios under different publishing umbrellas and merging others.
Halo Development Shifts to Activision
In the most significant change, Halo development is moving to Activision under a new purpose-built team. Halo Studios will continue as a support studio for now. Activision president Rob Kostich said the goal is to make the greatest Halo game ever, with the new team assembling to take the franchise forward. The move places Halo under the same publisher that has managed Call of Duty as an annual juggernaut, though the new Halo team will operate separately from the Call of Duty teams.
The shift comes after Halo Studios released a well-received Combat Evolved remake in July, a bright spot for the franchise. Now, the future of the series will be shaped by a fresh group within Activision.
Rare and World’s Edge Also Move Under Activision
Rare and World’s Edge are also moving under Activision. The two studios, known for their distinct portfolios, will now fall under the same publishing group as Call of Duty and the new Halo team. This consolidation suggests Activision will play a larger role in managing Microsoft’s core franchises.
Obsidian Joins Bethesda to Focus on Fallout
Obsidian is moving under Bethesda Game Studios and will refocus on Fallout. The studio, which has a history of role-playing games, will now contribute to the Fallout universe as Bethesda continues to develop the series. Fallout 5 has been announced as a far-off title, indicating long-term plans for the franchise.
Casual Games Shift to King
Microsoft’s casual games, including titles like Minesweeper and Solitaire, are moving under King. King, the mobile giant behind Candy Crush, will now oversee these classic casual properties. The move aligns with Microsoft’s stated focus on known hits like Minecraft, Halo, and Candy Crush.
Playground and Turn 10 Merge
Playground and Turn 10 are merging into a single studio. The two racing-focused teams will combine operations, a significant consolidation within Xbox’s first-party lineup. The merger is part of the broader restructuring that also affects Xbox Game Studios management and central functions.
Spinoffs and Remaining Studios
Double Fine and Compulsion are being spun off to go independent. Their departure further reduces the number of studios under the Xbox Game Studios umbrella, which now consists of a few teams like The Coalition and InXile. The Coalition’s Gears of War: E-Day launches next month, providing a major release for the remaining first-party portfolio.
Most notable new games are now expected to come from Activision Blizzard and Bethesda, with StarCraft also announced as a far-off title. The shift reflects a strategy that leans on established, high-reach franchises.
Game Pass and Hardware Future
Microsoft is reevaluating its investment in Game Pass, a service that expanded aggressively in recent years. The reassessment comes as the company prioritizes its goal of reaching more than a billion people daily. Despite the cuts, Xbox still plans a hardware future through Project Helix, its future hardware plan.
The Xbox brand has become increasingly diluted over recent years, with Game Pass expansion and acquisitions costing billions. The console business has become less important, and the exclusives strategy has been unclear. This restructuring, led by Asha Sharma, aims to refocus the division on known hits and streamline operations. The coming fiscal year will bring further layoffs as Microsoft continues to reshape its gaming business.
