Xbox continues reset with Halo Studios layoffs and Undead Labs divestment

Xbox has laid off another 268 employees as part of the restructuring it began in July 2026, affecting Halo Studios, other first-party teams, and the Xbox Game Studios management and central functions layer; Matt Booty said the division is roughly three-quarters of the way through the previously announced restructuring. Undead Labs has transitioned out of Xbox on terms similar to Double Fine and will release State of Decay 3 day one on Game Pass with a new publisher, while Ninja Theory faces a proposed closure and Arkane remains in consultation. Xbox is also merging internal studios, moving Rare and World's Edge under Activision, placing Obsidian under Bethesda, adding Microsoft Casual Games to King, and combining Playground Games and Turn 10, with Activision developing the next Halo led by a new purpose-built team.