Microsoft lays off Xbox employees in major studio reorganization

Microsoft has cut a further 268 roles across its gaming division, hitting first-party development teams, Halo Studios, and Xbox Game Studios management. Xbox Chief Content Officer Matt Booty announced the reductions in an internal memo on September 22, titled "Continuing Our Reset." 

The cuts bring Microsoft roughly three-quarters of the way through the 3,200 role reductions that Xbox CEO Asha Sharma laid out in July as part of what she called the biggest restructuring in Xbox's history.

Halo moves to Activision; studios consolidate

The most significant change is the transfer of the next mainline Halo title's development from Halo Studios (formerly 343 Industries) to Call of Duty publisher Activision, which is assembling a dedicated team for the project separate from its Call of Duty staff. A smaller team will remain at Halo Studios to support existing games, the community, and esports.

Several other studio mergers were announced alongside the layoffs:

• Activision's portfolio grows: Activision also takes over World's Edge (Age of Empires) and Rare (Sea of Thieves).
• Obsidian joins Bethesda: Bethesda now oversees Obsidian Entertainment, which continues work on Grounded and an unannounced Fallout project.
• Forza and Fable studios merge: Playground Games and Turn 10 Studios are combining into one studio covering both franchises.
• King absorbs Microsoft Casual Games: The Candy Crush maker takes over Microsoft's casual titles, including Microsoft Solitaire.
• Ninja Theory faces possible closure: Microsoft says two separate deals to hand off the Hellblade developer have now fallen through, and while the company says it still hopes to find a buyer, it has told staff the studio could close.

Elsewhere, Undead Labs has completed its spin-off from Microsoft on terms similar to Compulsion Games and Double Fine, which went independent in August; State of Decay 3 is still set to launch day one on Game Pass under its new publisher. Arkane in France remains the last of the five studios Microsoft moved to divest in July, with consultations expected to run through the end of the year.

Microsoft says the wider round of cuts announced this week totals fewer than 600 jobs globally, including around 300 in Washington state, and includes reductions outside Xbox in cloud, AI, marketing, and research.