Xbox Cuts 268 More Jobs as Halo and Rare Move to Activision

Microsoft's Xbox division confirmed on September 22 that it is cutting 268 more jobs and reshuffling almost its entire first-party studio lineup, the latest and possibly final phase of a restructuring effort that has now stretched well over a year. The announcement lands on top of roughly 1,600 layoffs from July, with Microsoft reportedly aiming for another 1,600 cuts by the end of its fiscal year — a scale of contraction that has left even veteran industry watchers stunned.

Unlike previous rounds, which were framed mostly around headcount reduction, this wave is defined by where entire franchises are landing. Xbox COO Matt Booty, in a memo to staff, kept the message brief: "Today, our focus should be on supporting those affected and treating one another with care and respect." The muted tone reflects a division that has spent the better part of two years absorbing the fallout of its $69 billion Activision Blizzard acquisition, and is still working out exactly what a unified Xbox-Activision studio system should look like.

Halo and Rare Change Address

The most eye-catching move is organizational rather than numerical: Halo Studios, the team behind gaming's flagship sci-fi shooter, is being folded into Activision, as are Age of Empires developer World's Edge and Sea of Thieves studio Rare. For franchises that have defined Xbox's identity since the original console launched in 2001, the shift to Activision's management structure marks a symbolic break from the old Xbox Game Studios model — and raises fresh questions about how much creative autonomy these teams will retain going forward.

Consolidation Elsewhere in the Portfolio

Two of Xbox's racing and RPG studios are also being merged. Turn 10 Studios, the long-running developer behind the Forza series, is combining with Playground Games to focus jointly on Forza and the upcoming Fable reboot — a pairing that suggests Microsoft wants fewer, larger teams working across fewer, bigger franchises rather than a wide bench of individual studios each maintaining their own game.

Obsidian Entertainment, known for narrative RPGs, is being folded into Bethesda while continuing work on its current slate, including the co-op survival game Grounded and an unannounced new entry in the Fallout series. Meanwhile Undead Labs, developer of the State of Decay series, is being spun out as a fully independent studio — though it will still release State of Decay 3 on Game Pass day one under a new publishing partner, a rare example in this round of a team gaining independence rather than losing it.

A Closure Nobody Wanted to Confirm

The grimmest headline in the announcement involves Ninja Theory, the Hellblade developer, which has been proposed for closure after what the company described as two separate partnership agreements falling through before completion. If finalized, it would mark the end of a studio that only joined Xbox in 2018 and delivered the critically acclaimed Senua's Saga: Hellblade II in 2024.

What It Means Going Forward

Taken together, insiders now estimate Xbox is roughly three-quarters of the way through the restructuring plan first set in motion well over a year ago. For players, the practical impact will likely show up gradually — in how Halo, Age of Empires, and Sea of Thieves are marketed and supported under Activision's banner, and in whether the newly merged Forza/Fable and Bethesda/Obsidian groupings speed up or slow down long-awaited releases. For an industry that has now watched tens of thousands of job cuts ripple across nearly every major publisher since 2023, Xbox's latest reset is another reminder that consolidation, not expansion, has become the operating logic of AAA game development.