Microsoft is cutting 268 roles across Xbox, the company’s gaming division, in the latest phase of a restructuring that has been underway since the summer. The reductions reach Halo Studios, other first-party teams and Xbox Game Studios management, according to a memo from Xbox chief content officer Matt Booty.
The same announcement confirms that Ninja Theory, the studio behind the Blade project, could be shut down. A formal consultation on a proposed closure has begun after two separate agreements to sell the studio fell through earlier in the summer. The consultation leaves open the possibility that another buyer could still emerge, but the default path now points toward closure.
Where the cuts land
Booty’s memo describes the 268 eliminated roles as spanning Halo Studios, first-party studios and XGS management. The cuts are part of a broader effort that Xbox leadership has said is roughly three-quarters complete after the July actions and the studio divestitures already set in motion.
The July layoffs were the largest single blow: 1,600 Xbox employees were impacted. Xbox CEO Asha Sharma described those cuts as the most significant restructure in the division’s history. Across Microsoft’s 2027 financial year, which ends in June 2027, the company has confirmed 3,200 roles will be impacted.
Ninja Theory and the failed sale attempts
Ninja Theory’s situation is the most immediate consequence of the studio divestiture plan. Two sale agreements were reached during the summer, and both collapsed. With no deal in hand, Xbox has moved to a closure consultation. Booty’s memo frames the consultation as a step taken while the company continues to explore other paths for the studio.
The studio’s current project, Blade, remains under that cloud. The brief does not specify what happens to the game if the closure proceeds, only that the consultation has begun and that a sale remains a possibility.
Studios already independent or separating
Four Xbox studios are being sold off as part of the restructuring, and two of them have already completed the transition to independence. Double Fine and Compulsion Games are now independent. Undead Labs has also completed its separation from Xbox, and Booty’s memo says that transition proceeded on similar terms to the Double Fine and Compulsion deals.
Arkane is a different case. Its consultation is ongoing under French labor laws, and that process is expected to continue through the end of the year. The French legal framework governs how the studio’s separation is handled, which is why the timeline extends beyond the September announcement.
Activision's expanded role
As part of the same reset, Activision is taking over several major Xbox properties. The Halo franchise, Sea of Thieves and World’s Edge are all moving under Activision’s purview. World’s Edge is the team responsible for Age of Empires.
The Forza developers are being merged into a single studio. That consolidation is separate from the divestitures and the layoffs, but it belongs to the same effort to simplify how Xbox’s remaining first-party operations are organized.
How the restructuring adds up
The September cuts are smaller than July’s, but they land on a workforce that is already smaller and on studios that have already been through significant change. The 268 roles eliminated now sit alongside the 1,600 impacted in July and the 3,200 roles confirmed across the 2027 financial year.
Booty’s memo says the July actions and the divestitures bring the restructuring to roughly three-quarters complete. It also acknowledges the difficulty for departing staff and expresses gratitude for their work. Sharma’s earlier characterization of the July cuts as the most significant restructure in Xbox history remains the frame for the whole effort.
What comes next
Ninja Theory‘s consultation is the most visible open question. Unless another buyer is found, the studio faces closure. Arkane’s consultation will run through the end of the year under French labor law. Undead Labs has already separated, and Double Fine and Compulsion Games are already independent. The Forza merger and Activision’s expanded role are moving forward.
Microsoft’s 2027 financial year ends in June 2027, and the company has confirmed 3,200 roles will be impacted over that period. The restructuring is not finished, but Xbox leadership now describes it as roughly three-quarters done after the July actions and the divestitures. The remaining quarter includes the consultations still in progress and any further changes that follow from them.
