Xbox Division Restructuring
Microsoft Confirms Hundreds of Xbox Job Cuts and Major Studio Restructuring
Anonymous
Key Points
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The latest cuts affect roughly 450 Microsoft employees companywide, including about 300 jobs in Washington state; 268 of the reductions are within Xbox Game Studios.
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Xbox Chief Content Officer Matt Booty said Activision will also oversee Rare and Age of Empires developer World’s Edge, in addition to leading development of the next Halo game. Microsoft acquired Activision for $69 billion in 2023.
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Microsoft has already returned Double Fine and Compulsion to independent ownership; Double Fine has begun a Kickstarter campaign to fund its next game, while Undead Labs is moving to another publisher whose identity has not yet been disclosed.
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Two attempts to sell or divest Ninja Theory have failed. Microsoft has begun redundancy consultations with the UK government and is still seeking a buyer for the studio and the Hellblade franchise.
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Microsoft’s chief people officer said the eliminated roles were not being directly replaced by artificial intelligence, while acknowledging that AI is changing how work is performed and how the company allocates resources.
Microsoft is cutting 268 jobs from its Xbox division in September 2026, the second major round of layoffs this year. Happy Magazine reported that the cuts represent roughly 20% of Xbox's total workforce, following 1,600 jobs eliminated in July. The company plans to eliminate about 3,200 roles by the end of fiscal 2027 as it consolidates studios and refocuses on major franchises.
The restructuring includes major shifts in who develops key games. Moneycontrol reported that Activision Blizzard—which Microsoft bought for $69 billion in 2023—will now oversee development of the next Halo game, taking that responsibility away from Halo Studios. Activision will also oversee Rare and the Age of Empires developer World's Edge.
Two Waves of Cuts Reshape Gaming Division
Microsoft announced plans to cut 3,200 jobs—roughly 20% of Xbox—by the end of 2027. The July cuts eliminated 1,600 positions. Now, Gamer Matters reports that September's action affects 268 additional employees across Halo Studios, Bethesda, and other teams. Xbox Chief Content Officer Matt Booty said these actions bring the company "roughly three-quarters of the way through" the restructuring plan.
The layoffs address what Xbox leaders call organizational bloat. Some studios operated under as many as 14 management layers. Microsoft aims to flatten structures to five layers or fewer, eliminating redundant executives and decision-making delays across the division.
Halo Stripped From Its Original Makers
For over a decade, Halo Studios (formerly 343 Industries) developed the Halo franchise. Now Activision will lead development of the next mainline Halo game. Booty said Activision would form a "new, purpose-built team" separate from Call of Duty work. Happy Magazine described the move as a major shift in how Microsoft manages its most iconic franchise.
Halo Studios will continue supporting existing Halo titles but loses control of future major games. The decision signals low confidence in the internal team's direction after years of player complaints about Halo Infinite. Activision's takeover consolidates publishing power into fewer, larger studios within Microsoft.
Studios Spun Out or Facing Closure
Microsoft has returned Double Fine Productions and Compulsion Games to independent ownership. Moneycontrol reported that Double Fine retained its IP and back catalog, and has launched a Kickstarter campaign to fund its next project. Undead Labs also became independent and is moving to another publisher whose name has not been disclosed.
Ninja Theory faces a different fate. Two attempts to sell or divest the studio have failed. Microsoft has begun redundancy consultations with the UK government, suggesting closure is possible. The studio was developing Senua, a new project Microsoft showed publicly at a summer showcase before initiating closure talks months later.
AI Not Directly Replacing Workers, Microsoft Says
Microsoft's chief people officer stated that the eliminated roles are not being replaced by artificial intelligence. However, the company acknowledged that AI is changing how work is performed and how resources are allocated across Xbox. The statement suggests job cuts stem from restructuring decisions, not automation.
The layoffs come as the broader gaming industry faces repeated rounds of cuts. UK Headtopics reported concerns about developer exodus from Xbox studios and uncertainty about future game releases. Industry observers worry that repeated layoff waves damage morale and talent retention at major studios.
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