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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.

Hellblade developer Ninja Theory enters closure consultation in new wave of Xbox cuts

Xbox chief content officer Matt Booty announced on the Xbox Wire blog that Ninja Theory has entered employee consultation over a proposed closure after two separate agreements fell through. The studio was developing Senua, a new Hellblade entry announced at the June Xbox Games Showcase, and was put up for sale by Microsoft within a month of its reveal. Booty said he will spend the next week with Xbox studios and hold an all-Xbox town hall on October 6.

NEW: Nearly 300 more jobs cut at Microsoft's gaming team (part of 3,200 announced in July). Majority at Halo Studios, reduced to support

Microsoft restructures Xbox: next mainline Halo moves to Activision as Halo Studios cuts 268 roles

Microsoft has handed the next mainline Halo game to Activision, which is forming a new purpose-built team separate from Call of Duty, while Halo Studios keeps only a small team supporting existing games and the community. Xbox Studios boss Matt Booty said 268 roles are being eliminated across Halo Studios, other first-party studios, and the XGS management and central functions layer. Activision president Rob Kostich said Halo, Rare, and World's Edge are joining Activision, as Ninja Theory closes and studios including Obsidian and Rare are consolidated under others.

Xbox transfers Rare and Halo to Activision, proposes closing Ninja Theory and cuts another 268 roles

Xbox is transferring Rare and ownership of the Halo franchise to Activision, proposing the closure of Ninja Theory with a staff consultation, and cutting 268 roles in the restructure. Activision will also take on World's Edge and build a new team for the next Halo, Bethesda will absorb Obsidian, Playground and Turn 10 will merge into one studio for Forza and Fable, and Undead Labs has left the business and will release State of Decay 3 day one on Game Pass with a new publisher. Xbox said it is roughly three-quarters of the way through a planned 3,200 job cuts this year.

Xbox reportedly set to announce second round of layoffs this week

Xbox is reportedly preparing a second round of layoffs this week, with a source saying the company will consolidate several of its game studios, according to The Information. VGC reports this could involve mergers or internal changes at Xbox Game Studios, Bethesda, Activision and Blizzard. Xbox had announced plans to cut 3,200 employees in July, with the first round resulting in 1,600 redundancies and the divestment of five internal studios.

Heart Machine faces possible closure after publishing deal falls through, majority of staff laid off

Hyper Light Drifter developer Heart Machine is at risk of shutting down after a publishing deal collapsed, with nearly everyone at the studio laid off. Studio head Alx Preston said on LinkedIn that without this key income and other immediate prospects or funds, almost all staff had to be let go, and that everyone will be offered support including help with placement. Heart Machine has gone through three rounds of layoffs in nearly three years, including cuts in November 2024 before Hyper Light Breaker's early access launch and two more rounds in October 2025.