Microsoft Restructures Xbox and Moves Halo Development to Activision

Microsoft is executing a large-scale restructuring of its Xbox division, aiming to eliminate approximately 3,200 roles by the end of June 2027. On September 22, 2026, the company initiated a new round of layoffs affecting roughly 500 employees companywide, including 268 positions across Halo Studios, other first-party developers, and Xbox Game Studios management. Chief Creative Officer Matt Booty stated these actions bring the company roughly three-quarters of the way through the restructuring plan.

As part of this reset, Microsoft has transferred the development of the next mainline Halo game to a new, purpose-built team at Activision. Halo Studios, formerly 343 Industries, has been reduced to a small support team for existing titles and the community. The reorganization includes several studio mergers and shifts: Activision now oversees Rare and World's Edge, Bethesda has absorbed Obsidian Entertainment, and King has incorporated Microsoft Casual Games. Additionally, Playground Games and Turn 10 Studios have merged into a single entity.

Xbox CEO Asha Sharma characterized the move as the most significant restructure in the brand's history, intended to reverse poor financial results and reach one billion daily users by 2030. Other divestments include the transition of Compulsion Games, Double Fine, and Undead Labs to independent management. Microsoft has also begun consultations to close Ninja Theory after two failed sale agreements, while consultations for Arkane remain ongoing.