Microsoft hands Halo to Activision and cuts 268 more Xbox roles

Microsoft has announced a sweeping restructuring of its Xbox business, handing the Halo, Sea of Thieves and Age of Empires franchises to Activision, merging two of its British studios and eliminating another 268 roles. According to The Verge, Xbox chief content officer Matt Booty laid out the changes in an internal memo, saying the cuts span Halo Studios, other first-party studios, and the Xbox Game Studios management and central functions layer.

Activision takes over Halo

The most consequential change concerns Halo. The next flagship installment in the franchise will be built by Activision, by a newly assembled team that operates separately from Call of Duty development. A small remaining group at Halo Studios will continue supporting existing titles such as Halo Infinite and Halo: Campaign Evolved.

"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," Booty wrote in the memo obtained by The Verge. Activision president Rob Kostich framed the goal as making "the greatest Halo game ever, worthy of its universe and legacy."

The Verge notes that the handoff arrives less than two years after Microsoft moved Halo development to Unreal Engine 5, and after several years of leadership changes and layoffs at Halo Studios, the team formerly known as 343 Industries.

Alongside Halo, Activision's remit expands to include World's Edge, the studio behind Age of Empires, and Rare's UK developers, with Activision also taking control of Sea of Thieves. The Verge reports it is unclear whether those studios are affected by the layoffs.

Another wave of layoffs

The 268 job cuts are the second round of Xbox layoffs this year. Roughly 1,600 Xbox employees were laid off in July, a move Xbox CEO Asha Sharma characterized at the time as "the most significant restructure in Xbox history." Microsoft has previously said 3,200 roles will be impacted across its 2027 financial year, which ends in June 2027.

With the latest cuts, nearly 1,900 roles have been eliminated in total, leaving more than 1,000 still to be announced. Booty told staff the actions completed since July, including studio divestitures, bring Microsoft "roughly three-quarters of the way through previously announced restructuring."

Ninja Theory heads toward closure

The restructuring also includes the sell-off of several studios. Compulsion and Double Fine returned to independent management in August with their IP, back catalogs and runway funding. Undead Labs has now transitioned on similar terms, and its State of Decay 3 will still launch day one on Game Pass under a new publisher.

Ninja Theory's situation is more dire. Two separate sale agreements for the studio fell through, and Booty said Microsoft will now "begin consultation with employees on a proposed closure while continuing to explore other paths forward." A consultation over the future of Arkane, which must follow French labor law and covers the studio's Blade game, is expected to continue through the end of the year.

Obsidian joins Bethesda as studios consolidate

Elsewhere, Microsoft confirmed Obsidian is moving under Bethesda, where it will continue current projects such as Grounded and collaborate with Bethesda Game Studios on a new Fallout title. Turn 10 Studios and Playground Games are merging into a single studio focused on the Forza and Fable franchises, while Microsoft's casual games unit, responsible for Solitaire, Mahjong and Minesweeper, moves from Bethesda to King.

The reorganization follows notable departures: former Rare studio chief Craig Duncan, who became head of Xbox Game Studios in 2024, resigned from Microsoft in June, with chief of staff Louise O'Connor leaving alongside him. Booty said Xbox will hold an all-team town hall on October 6.

Why it matters

Halo is Xbox's defining franchise, and its next mainline game being developed by the publisher of Call of Duty marks a decisive break from the 343 Industries era. The reshuffle shows Microsoft consolidating its gaming business into fewer, larger units built around Activision, Bethesda and King, a structure that only became possible after the Activision Blizzard acquisition. It also signals that the pain is not over: more than 1,000 further role cuts are still to come, and studios once considered core first-party assets are being sold off or closed entirely. For developers and players alike, the episode underlines how aggressively Microsoft is willing to redraw its gaming map in pursuit of fewer, bigger bets.