Microsoft Cuts 268 Xbox Roles and Shifts Halo Oversight to Activision in Major Restructuring

Microsoft has eliminated 268 positions across Halo Studios, first-party development teams, and central management functions as part of an ongoing restructuring of its gaming division. The latest reduction brings the company roughly three-quarters of the way through a broader workforce reduction plan announced earlier this year, which aims to impact 3,200 roles by the conclusion of fiscal 2027.

Prior to these events, Microsoft stated plans in May to shut down the Japanese studio Tango Gameworks, which was subsequently acquired alongside its intellectual property by Krafton. Additionally, Twisted Pixel recently became independent after buying itself back from Microsoft.

The sweeping reorganization has drastically reshaped the Xbox studio ecosystem, transferring major franchises to different corporate oversight structures. Activision is taking over the management of the Halo franchise, along with Sea of Thieves and World's Edge, while a specialized team under Activision will handle the development of future Halo titles independently of its Call of Duty operations.

The restructuring has triggered widespread structural shifts, including studio spinouts and asset sales. Double Fine Productions and Compulsion Games have successfully transitioned to independence, taking their intellectual property and existing catalogues with them. A similar spinout process is proceeding for Undead Labs, which anticipates launching State of Decay 3 on Game Pass under a new publisher upon release.

Conversely, other prominent development teams face severe operational uncertainty. Xbox chief content officer Matt Booty confirmed that two separate agreements to sell Ninja Theory had collapsed, prompting the initiation of employee consultations regarding a potential studio closure while alternative pathways are evaluated. Meanwhile, discussions concerning Arkane are continuing under French labour regulations and are projected to extend through the end of the year.

In other financial forecasts, Microsoft projected capital expenditures of approximately $190 billion for the 2026 calendar year. French labor regulations also establish specific notification timeframes based on the total number of proposed layoffs.

The breadth of the reductions has impacted veteran personnel across multiple key franchises, including Gears of War developer The Coalition. Josh Daniels, formerly the cinematic director at Halo Studios, noted on professional networking platforms that he was promoted and subsequently laid off within the same week during the downsizing.

Other internal realignments involve Bethesda expanding its operational scope to oversee Obsidian, while Playground Games and Turn 10 have been merged into a single organizational unit dedicated to the Forza and Fable franchises. Microsoft Casual Games is also being integrated under King, the developer behind Candy Crush.

The gaming unit adjustments follow previous statements by Xbox CEO Asha Sharma regarding financial pressures, noting that margins were significantly lower than comparable platform businesses. The ongoing reorganization coincides with broader corporate performance where Microsoft's overarching revenue topped $331 billion, even as the More Personal Computing segment recorded a 4% decline to $12.9 billion in the June quarter.

Microsoft leadership is expected to outline further details regarding upcoming game pipelines and structural progress during an all-Xbox town hall scheduled for October 6.