Another Round of Cuts at Xbox
On September 22, 2026, Xbox chief content officer Matt Booty sent an internal memo confirming the latest wave of cuts at Microsoft's gaming division — 268 roles eliminated across Halo Studios, other first-party teams, and the Xbox Game Studios management layer.
“"The actions completed since July, inclusive of the studio divestitures, bring us roughly three-quarters of the way through previously announced restructuring. I am deeply grateful for what our colleagues have built, and I know how difficult today will be for those leaving and the teams around them."
— Matt Booty, Xbox EVP (internal memo via The Verge, September 22, 2026)
This latest round brings the total number of Xbox layoffs in 2026 to approximately 1,900, according to Digital Foundry's reporting on September 22. Microsoft's target of 3,200 role reductions by the end of its 2027 fiscal year (June 2027) means roughly 1,300 more cuts are still to come.
The restructuring covers not just headcount but the fundamental structure of Xbox's studio portfolio — who makes what, under whose roof, and which studios still exist at all.
The New Structure: Who Gets What
Booty's memo outlined a sweeping reorganization. The key moves:
| Studio / Franchise | Change | Overseen By |
|---|---|---|
| Halo Studios | Next mainline Halo → new Activision team; skeleton crew stays for in-market support | Activision |
| World's Edge | Age of Empires development | Activision |
| Rare | Sea of Thieves support | Activision |
| Obsidian Entertainment | Grounded + new Fallout project | Bethesda |
| Turn 10 Studios | Merges with Playground Games for Forza + Fable | Playground Games |
| Microsoft Casual Games | Solitaire, Minesweeper | King |
| Ninja Theory | Proposed closure; consultation underway | — |
Activision, acquired for $69 billion in 2023, is now taking on far more than Call of Duty. The company is being positioned as a lead publisher and developer for some of Xbox's most storied franchises.
Halo and Activision: A New Era — or a Warning Sign?
The headline move is Halo. Microsoft has tasked Activision with building a new team — explicitly separate from its Call of Duty operation — to develop the next mainline game in the franchise.
“"Activision will also be developing the next Halo title, led by a new, purpose-built team that is separate from ongoing development and plans for Call of Duty."
— Matt Booty (The Verge, September 22, 2026)
Activision President Rob Kostich framed this as an opportunity, telling Times of India the aim is to "make the greatest Halo game ever."
The community reaction has been more skeptical. Activision's reputation has been shaped by annual Call of Duty cycles and years of live-service monetization controversies. Whether it can steward a franchise with Halo's identity — longer development windows, strong single-player campaigns, and a legacy tied to the original Xbox hardware — remains the central question.
For context: Halo Studios, formerly known as 343 Industries, has managed the franchise since Bungie's departure in 2010. Halo Infinite launched to a divisive reception in 2021 before finding its footing, and Halo: Campaign Evolved arrived earlier this year. A small team at Halo Studios will continue to support those games. The mainline future, however, is now entirely in Activision's hands.
Ninja Theory's Unresolved Fate
Of all the announcements, Ninja Theory's situation is the most painful to read. The Cambridge-based studio behind both Hellblade games had been on the block for sale, with Microsoft attempting to find a buyer rather than simply shut it down. Two separate agreements fell through, according to The Game Business as reported by Digital Foundry. Xbox has now "begun consultation with employees on a proposed closure while continuing to explore other paths forward."
The timing stings. Microsoft publicly announced a Ninja Theory game due in 2027 just three months ago.
Ninja Theory occupies a distinct niche in the Xbox portfolio — small-scale, critically acclaimed, and known for taking creative risks. Senua's Saga: Hellblade II, released in 2024, was widely praised for its portrayal of psychosis and its technical presentation. The prospect of that creative lineage ending here has prompted strong reactions from players and developers alike.
Separately, Arkane Studios' situation remains unresolved and is expected to continue through the end of the year.
Why Microsoft Is Doing This
The business rationale for this scale of restructuring isn't new — CEO Asha Sharma spelled it out in her July memo when the first wave was announced. Xbox was operating at "margins three to 10 times lower than comparable platform and publishing businesses," and in a typical year was losing 64 cents for every dollar invested in studios. The structure was, by Microsoft's own admission, unsustainable.
Booty's framing of the goal is to "operate fewer business units, align groups that already work closely together, and focus publishing expertise." The studio divestitures — Compulsion Games and Double Fine went independent in August with their IP and runway funding, Undead Labs followed — were part of the same logic: assets Microsoft couldn't make profitable at its overhead level may have a better chance independently.
For Undead Labs, at least, the outcome has a silver lining: State of Decay 3 will still launch day one on Game Pass under its new publisher.
Community Reaction
The response from both developers and players has been bleak. A reader poll on Digital Foundry's report found that 78% of respondents said they have little to no confidence in the future of Xbox as a brand. The remaining 22% were split between moderate and strong confidence.
The developer community's reaction on social media has focused on two things: the human cost of repeated layoffs, and the strategic incoherence of announcing a Ninja Theory title and then beginning closure proceedings within the same year. The sentiment echoes previous waves — that Microsoft's acquisition spree brought in more talent and IP than it knew how to sustainably operate, and that the studios caught in the reset had little control over outcomes.
Matt Booty's memo closed with a commitment to spend the week visiting studios and host an all-Xbox town hall on October 6 to "look ahead to one of the strongest game lineups in our history." Whether that message lands depends on who's still there to hear it.
What Comes Next
The restructuring is 75% complete, with approximately 1,300 more reductions expected before June 2027. The Arkane situation remains in consultation. The Ninja Theory closure consultation has no stated timeline. The new Activision-led Halo team has not disclosed a development timeline or any details about the game.
For players: games already in market — Halo Infinite, Halo: Campaign Evolved, Sea of Thieves, and Obsidian's current slate including Grounded — will continue to be supported. What happens to franchises like Age of Empires and Sea of Thieves under Activision's direction is a longer-term question that won't be answered this year.