Microsoft has just announced one of the most significant overhauls in Xbox history. This move, internally called the "Xbox Reset," is part of an ongoing restructuring process that began earlier this year. The announcement covers new layoffs, major studio shifts, and a game-changing update about the future of Halo, one of the brand's most iconic franchises.

Scope of Layoffs

In a message sent globally to Xbox employees, Microsoft revealed that 268 positions are being eliminated across Halo Studios, other first-party studios, Xbox Game Studios (XGS) management, and central operations. These cuts follow the major wave of 3,200 layoffs announced in July, half of which were implemented at that time.

A Major Shift for Halo's Future

The most striking part of the announcement centers around Halo. The significantly downsized Halo Studios (formerly 343 Industries) will no longer lead development for the next major Halo game. Instead, this responsibility is being handed over to Activision, now under Microsoft's umbrella. The specific team working on this new title has not yet been named, and it's unclear whether an existing Call of Duty team will take over or if a brand-new team will be formed. A small group will remain at Halo Studios to continue supporting existing titles like Halo Infinite and Halo: Campaign Evolved, meaning the studio isn't closing entirely but will no longer be the driving force behind the franchise.

Major Studio Reassignments

Several studios under Xbox Game Studios are being shifted to new divisions within the organization:

• Rare (Sea of Thieves) and World's Edge (Age of Empires) will now operate under Activision.
• Obsidian Entertainment is moving under Bethesda; the studio will continue ongoing projects like Grounded and a new Fallout project developed in partnership with Bethesda Game Studios.
• King will expand its responsibilities to include Microsoft Casual Games, merging two major casual and live ops teams.
• Playground Games and Turn 10 will combine under a single studio focused on the Forza and Fable franchises.

The Uncertain Fate of Ninja Theory

Back in July, Microsoft announced that it was in talks to sell UK-based Ninja Theory, the studio behind the Hellblade series, to an undisclosed buyer. Microsoft has now confirmed that this deal fell through, as did a subsequent attempt with another party. As a result, Ninja Theory now faces the risk of closure.

Why Are These Changes Happening Now?

This restructuring aligns with the strategic direction set by Xbox CEO Asha Sharma, who took office in February 2026. Sharma's approach prioritizes shifting investments away from smaller, recently acquired teams and focusing resources on globally recognized franchises like The Elder Scrolls, Fallout, Call of Duty, and Minecraft. This targeted strategy may also impact Blizzard Entertainment, which has recently been in the spotlight with high-profile announcements such as StarCraft, Diablo V, and World of Warcraft: Forever. Some reports suggest Blizzard could also face layoffs soon.

This Is Not an Isolated Incident

Layoff waves have become almost routine in Microsoft's gaming division since the acquisition of Activision Blizzard. In the first major round after the 2023 acquisition, about 1,900 employees lost their jobs, with numbers rising in subsequent rounds. Today's announcement marks the latest and most comprehensive chapter in this ongoing restructuring process.

Frequently Asked Questions

Is Halo Studios shutting down?

No, it's not shutting down completely. While the studio is undergoing significant downsizing, a small team will remain to support existing games (Halo Infinite, Halo: Campaign Evolved). However, they will no longer lead development for the next major Halo title.

Who is developing the next Halo game?

The development responsibility is being transferred to Activision. The specific team for this project has not yet been announced.

Is Ninja Theory closing?

It's not definitive. Two separate sale attempts have failed, and the studio is currently at risk of closure, but no official shutdown has been announced yet.