Microsoft has announced a significant restructuring of its Xbox game studios, a move that reshapes how several major franchises will be developed and managed. The changes, revealed on September 22, 2026, include transferring oversight of the Halo franchise to Activision, merging two racing-focused studios, and eliminating 268 roles across the division.
Activision to Develop Next Halo Title
Under the new structure, Activision will take on development of the next flagship Halo game. According to Matt Booty, Xbox chief content officer, a purpose-built team is already being assembled for the project, and it will operate separately from Call of Duty development. Rob Kostich, Activision president, stated that the goal is to create the greatest Halo game ever.
Halo Studios, formerly known as 343 Industries, will not lead development of the next mainline entry. Instead, a smaller team within Halo Studios will continue to support Halo Infinite and Halo: Campaign Evolved, as well as the broader community. The studio had moved to Unreal Engine 5 less than two years ago and has undergone leadership changes and prior layoffs in recent years.
Layoffs and Restructuring Progress
The restructuring comes with 268 roles eliminated across Halo Studios, first-party teams, and Xbox Game Studios management. Booty noted that the process is roughly three-quarters complete. This is the second round of Xbox layoffs this year, following 1,600 cuts months earlier. Microsoft has targeted 3,200 Xbox roles for impact by the end of its 2027 financial year in June 2027. So far, nearly 1,900 roles have been cut, leaving more than 1,000 still to be announced.
An Xbox town hall is scheduled for October 6, where further details may be shared with employees.
Studio Realignments and Moves
Several studios are shifting under the new structure. World’s Edge, the team behind Age of Empires, will join Activision. Rare’s UK team, which works on Sea of Thieves, will also move to the Activision side. Obsidian Entertainment will transition to Bethesda to work on a new Fallout project alongside Bethesda Game Studios, while continuing development on Grounded and its current projects. The Fallout title may connect to the success of the television series.
Microsoft Casual Games, which includes Solitaire, Mahjong, and Minesweeper, will move from Bethesda to King.
Turn 10 and Playground Merge
Turn 10 Studios and Playground Games will merge into a single studio. The combined team will focus on the Forza Horizon and Fable franchises. This consolidation aims to streamline development across the two racing and role-playing properties.
Closures, Divestitures, and Ongoing Consultations
Ninja Theory faces a proposed closure, as two agreements fell through, and a consultation process has begun. Arkane’s consultation is expected to continue through the end of the year. Earlier, in August, Compulsion Games and Double Fine Productions were divested and returned to management. Undead Labs has also been transitioned to a new publisher, with its upcoming title State of Decay 3 still set to launch day one on Game Pass.
These moves follow the resignations of Craig Duncan, former head of Xbox Game Studios, in June, and Louise O’Connor, former chief of staff, who left alongside him. Their departures preceded the broader Xbox reset.
A Reset in Motion
The restructuring reflects Microsoft’s ongoing effort to reorganize its gaming business, which has seen multiple rounds of layoffs and studio sales. With the process roughly three-quarters complete and more role reductions expected, the company is positioning its key franchises under new leadership while managing costs ahead of the 2027 financial year.
