Xbox Cuts 268 More Jobs As Activision Takes Over Development Of The Next Mainline Halo Game

Xbox eliminated 268 roles across Halo Studios, other first-party studios, and the Xbox Game Studios management layer this week, and handed development of the next mainline Halo title to a newly formed team inside Activision.

Microsoft did not break out how many of the 268 cuts came from Halo Studios specifically. The move is part of a larger restructuring plan Xbox CEO Asha Sharma announced on July 6, 2026: roughly 3,200 Xbox jobs eliminated through fiscal year 2027, about 20 percent of the division. That July wave cut 1,600 positions on its own and was bundled with a broader Microsoft layoff of about 4,800 employees company-wide. Sharma cited weak margins, investment that failed to produce growth, and a hardware-component cost crisis as the reasons behind the cuts.

Xbox executive Tim Booty said the actions taken between July and September, including this week’s studio divestitures, put the division “roughly three-quarters of the way through” the plan announced in July.

Halo Studios itself is not closing. The studio, rebranded from 343 Industries in October 2024, will keep “a small team” in place to support the community and titles already on the market, including Halo Infinite and the July 28, 2026 remake Halo: Campaign Evolved. That remake shipped only about eight weeks before this round of cuts. Development of the next full Halo game moves to a new team inside Activision built specifically for the project, separate from the Call of Duty organization.

Activision president Rob Kostich framed the handoff as a fresh start for the franchise: “For Halo, our goal is clear: make the greatest Halo game ever, worthy of its universe and legacy, while staying true to what made players love it in the first place.” He said a team is already being assembled.

The Xbox memo detailed a wider reshuffling of first-party studios beyond Halo. Activision also takes over Rare, developer of Sea of Thieves, and World’s Edge, developer of Age of Empires. Bethesda takes Obsidian, which will continue its current projects alongside a new Fallout collaboration. King takes over Microsoft Casual Games. Playground Games and Turn 10 are merging into a single studio focused on Forza and Fable.

Compulsion Games and Double Fine already returned to independence in August, and Undead Labs completed a similar transition while remaining committed to shipping State of Decay 3 day one on Game Pass. Two separate sale agreements for Ninja Theory fell through, and that studio is now entering consultation on a proposed closure. Arkane Lyon remains in consultation as well.

Halo Studios has been the sole steward of the franchise since Bungie departed after 2010’s Halo: Reach. The 2024 rebrand and the studio’s switch to Unreal Engine 5 were pitched as a new chapter after Halo Infinite underperformed and the studio abandoned its in-house Slipspace engine.

Video game commentator Yorch Torch Games did not credit the restructuring as a fix. “Years of progressive pandering,” he said. “Years of antagonizing Halo’s fan base. Years of not giving players what they want. And now Halo Studios is part of Activision. What did Microsoft do for an entire decade with its game studios? Nothing. These layoffs? They won’t change a thing.”

Xbox has scheduled an all-staff town hall for October 6. Still unknown: exact headcount at Halo Studios before and after the cuts, whether any current Halo staff will move over to the new Activision team, and any timeline for the next mainline game beyond Kostich’s statement of intent.

If Activision is starting over with a purpose-built team outside Halo Studios entirely, is that an admission that the 2024 rebrand and engine switch already failed, or a reset with different odds?