Microsoft Rewires Xbox as Halo, Rare and Obsidian Change Hands

SEATTLE — Microsoft is preparing to share several Xbox-related announcements with consumers on October 6, according to Xbox Chief Content Officer Matt Booty. The promotional event is scheduled one day before the company hosts its first major Surface hardware event in more than two years, on October 7.

The announcements will come as Microsoft executes a fundamental restructuring of its gaming division. The Redmond-headquartered technology giant has cut another 268 jobs across Halo Studios, various first-party developers, and Xbox Game Studios management. Booty announced the reductions internally as the latest phase of a multi-year downsizing effort.

The reductions are part of an estimated 1,600 layoffs projected to run through July 2027. Separately, Microsoft’s latest fiscal year 2027 reorganization is expected to eliminate approximately 3,200 jobs between July 2026 and July 2027, after beginning in July 2026. By the end of the restructuring cycle, roughly 44,000 positions will have been eliminated across Microsoft’s global workforce since the beginning of 2023.

Microsoft’s gaming operation is moving away from a loose federation of semi-autonomous creative teams and toward a centralized, IP-focused corporate structure. The shift follows the company’s historic $68.7 billion acquisition of Activision Blizzard, after which Microsoft continued to pare back operations.

The changes reach the Xbox platform’s most recognizable franchise. Development of the next mainline *Halo* title has been removed from Halo Studios, formerly known as 343 Industries, and assigned to a newly assembled team managed by Activision, the maker of *Call of Duty*. Halo Studios struggled with the protracted development and mixed reception of 2021’s *Halo Infinite*.

Halo Studios will instead maintain and support legacy titles, including *Halo: Campaign Evolved* and *Halo: The Master Chief Collection*. The move ends the independent identity of the *Halo* franchise, the sci-fi shooter series that defined the Xbox platform for more than two decades.

Activision’s management umbrella will also expand to Rare, the British developer behind *Sea of Thieves*, and World’s Edge, the studio overseeing the *Age of Empires* real-time strategy franchise. King, the mobile gaming company behind *Candy Crush* that Microsoft acquired through the Activision Blizzard merger, is absorbing the operations of Microsoft Casual Games.

Microsoft is also changing the structure of its role-playing and racing portfolios. Obsidian Entertainment, which Microsoft acquired in 2018, is being placed under the operational umbrella of Bethesda Softworks, acquired through Microsoft’s 2021 purchase of ZeniMax Media. Obsidian and Bethesda are collaborating on an unannounced *Fallout* title following the renewed mainstream popularity of the IP after its successful television adaptation.

Obsidian is simultaneously developing *Grounded 2*. Bethesda continues the slow-burn development of *The Elder Scrolls VI*, the highly anticipated fantasy sequel announced in 2018 that remains at least two years away from release.

Playground Games, developer of the *Forza Horizon* series and the upcoming *Fable* reboot, is being merged with Turn 10 Studios, creator of the core *Forza Motorsport* games. The two entities will operate as a single unified studio.

Microsoft is narrowing its focus onto its largest, most bankable intellectual properties while specialized mid-tier studios are being spun off or prepared for liquidation. The future of Cambridge-based Ninja Theory, developer of *Senua’s Saga: Hellblade II*, is highly uncertain after Microsoft reportedly made two unsuccessful attempts to find a buyer. Executives have not officially announced a shutdown, but the failed divestment search leaves Ninja Theory highly vulnerable to closure.

A separate divestment process covers Arkane Lyon, the French studio behind *Deathloop* and the upcoming *Marvel’s Blade*. Microsoft intends to continue searching for a buyer for the Lyon-based studio through the end of the calendar year. The search follows the controversial closure of Arkane’s sister studio, Arkane Austin, in mid-2024.

Other studios have already left the Xbox ecosystem. During an initial round of cuts in July 2026, Microsoft allowed Double Fine Productions, the developer of *Psychonauts 2*, and Compulsion Games, the developer of *South of Midnight*, to regain their independence with their intellectual property back catalogs intact. Undead Labs will continue developing *State of Decay 3* under the banner of a new, yet-to-be-disclosed publisher.

The company-wide contraction follows a broader post-pandemic downturn across the technology and video game industries, marked by rising production costs, shifting consumer spending habits, and high interest rates. Microsoft’s reported reductions include:

| Date (Announcement) | Reported Headcount Cut | Main Business Areas Hit |
| :— | :— | :— |
| **Jan 18, 2023** | 10,000 | Windows & devices, Xbox, HoloLens, recruiting & marketing |
| **Jan 25, 2024** | 1,900 | Activision Blizzard, Xbox, ZeniMax after the ABK deal closed |
| **Jun 3-4, 2024** | ~1,000 (internal est.) | Azure for Operators, HoloLens/mixed-reality, other “moonshot” teams |
| **Sep 12, 2024** | ~650 | Xbox publishing & game-studio support teams |
| **Jan-Feb 2025** | ~2,000 | Company-wide “low-performer” cull (no severance in many cases) |
| **May 13, 2025** | ~6,000 (Microsoft says “< 3% of staff") | All geographies; focus on middle-management, LinkedIn |
| **Jun 2, 2025** | 305 | Redmond, Washington HQ roles; additional WARN-notice layoffs following the May cuts |
| **Jul 2, 2025** | ~9,000 (Microsoft says "< 4% of staff") | Company-wide; Xbox, sales, management layers, and other divisions |
| **Apr 23, 2026** *(opens May)* | Up to ~8,750 offered voluntary exit | US employees at senior director level and below whose age plus tenure equals 70 or higher; certain sales staff excluded |
| **Fiscal Year 2027** *(beginning July 6, 2026)* | ~4,800 | Largest reset in Xbox history, five game studios divested |