Xbox’s planned restructure is roughly three-quarters complete, while the company plans to eliminate 268 roles across Halo Studios, other first-party studios, and the Xbox Game Studios management and central functions teams. Matt Booty outlined the next phase in an announcement to Team Xbox employees on Sept. 22, 2026.
The 268 cuts follow 1,600 role eliminations in July within a broader plan that could affect approximately 3,200 roles throughout FY27. Microsoft also announced four studios departing from Xbox. The latest reporting indicates that the final layoff total will fall short of that earlier estimate rather than reach it through direct job reductions alone. Sources cited in Jez Corden’s Windows Central report said gaming division cuts in 2026 will still number in the thousands, but Microsoft has not provided a replacement total.
Employee transfers, team restructuring, and studio divestitures are changing how the plan is being carried out. Microsoft is trying to move some employees into other departments instead of eliminating every affected role, while the separation of studios removes positions from the direct layoff count. The final gap below 3,200 remains unknown.
In the July reset statement, Xbox CEO Asha Sharma framed the changes as a path back to growth and profitability. The company pointed to margins three to 10 times lower than its competitors, a smaller install base, and a higher cost structure entering the current console generation as pressures behind the reset.
Possible changes to where some game teams sit within the company are part of that approach. Moving teams out from under Microsoft’s umbrella could reduce bureaucracy and overhead, but those changes remain proposed structural moves rather than confirmed transfers.
Actions completed since July, including studio divestitures, have moved Xbox through roughly three-quarters of its previously announced restructuring. The company is reducing the number of business units and grouping teams that already work closely together, with the stated aim of putting more focus on its franchises, games, and publishing operations. The reset is therefore a studio map as much as a headcount exercise.
Xbox connects Halo, Forza, and Fable teams
Activision Blizzard King will expand its responsibilities to include World’s Edge, known for Age of Empires, and Rare, the studio behind Sea of Thieves. The 268-position round also names Halo Studios, The Coalition, World’s Edge, and Treyarch among the affected teams, alongside Xbox Game Studios management and central functions. Activision Blizzard King will develop the next Halo game through a new purpose-built team that will operate separately from Halo’s ongoing development and Call of Duty plans. A smaller team at Halo Studios will continue supporting the existing games and their communities.
Activision president Rob Kostich said the company’s goal is to make “the greatest Halo game ever” while staying true to what players love about the series. The new team will remain separate from Call of Duty’s ongoing development, keeping future Halo production distinct from the franchise’s current operations.
Playground Games and Turn 10 will become one studio focused on the Forza and Fable franchises. The teams have already worked closely together, including on Forza Horizon 6, which Playground developed with assistance from Turn 10. Booty described them as creative and franchise partners for more than a decade, with the new structure formally bringing their work together.
Bethesda will add Obsidian to its group of studios. Obsidian will continue its current projects, including Grounded, along with the new Fallout project being developed in collaboration with Bethesda Game Studios. The Game Business analysis also describes concern among some Obsidian team members that the Bethesda arrangement has reduced the autonomy and freedom they were promised. Keeping the studio together while it works on a major property such as Fallout could still prove to be a positive outcome.
King will also take on Microsoft Casual Games, joining two major teams working in casual game design and live operations.
Xbox’s remaining teams have releases planned through 2027
The reorganization leaves several Xbox-branded teams with a clear slate of upcoming releases. The Coalition’s Gears of War: E-Day is scheduled for Oct. 6, 2026, while Playground Games and Turn 10’s Fable is planned for Feb. 23, 2027. InXile Entertainment’s Clockwork Revolution is also planned for sometime in 2027.
Gears of War: E-Day and Clockwork Revolution are being positioned as Xbox console exclusives. The Coalition has also faced layoffs despite Gears of War: E-Day having gone gold, adding uncertainty around how much independence the remaining teams will retain after their current projects ship.
The corporate chart does not establish a new release policy for PlayStation. Activision’s multiformat output has broadly continued since Microsoft’s acquisition of the company, while Bethesda’s console history includes Redfall and Starfield. Starfield is now available on PS5, and Bethesda has also outlined Year 3 plans for the game involving more stories, gameplay improvements, and updates.
Activision and Bethesda could still make different decisions about future releases. Possible choices around franchises such as The Elder Scrolls and Fallout are not established by the new reporting lines, so the next publishing decisions will reveal more than the organizational chart itself. The label on the door may change, but Microsoft’s ownership of the games does not.
Undead Labs transitions while Ninja Theory faces consultation
Compulsion Games and Double Fine returned to management in August with their intellectual property, back catalogs, and runway funding. Undead Labs has now made a similar transition. Its next game, State of Decay 3, will release day one on Game Pass under a new publisher, as confirmed in an official statement from the State of Decay team.
A proposed acquisition of Undead Labs by Splash Damage did not complete. Compulsion’s transition was also reflected on Steam when its publisher listing for South of Midnight changed from Xbox Game Studios to Compulsion Games.
Ninja Theory faces a less certain path after two separate agreements fell through. UK law prevents Xbox from closing the Cambridge-based studio immediately, according to The Game Business analysis, leaving roughly six weeks to secure a buyer or another arrangement. Two potential investors reportedly decided that acquiring the team would cost too much.
Ninja Theory’s next project is referred to as Senua in the analysis and is described as a significant step-up from Hellblade 2. The game remains slated for 2027, although the consultation puts the studio’s route to that release under scrutiny.
Arkane Lyon’s consultation will continue through 2026
Arkane Lyon is also being divested from Xbox, making it the fifth studio named in the restructuring after Double Fine, Compulsion Games, Undead Labs, and Ninja Theory. Its consultation remains underway under the process required by French law. Studio management is consulting with its Works Council, and the process is expected to continue through the end of 2026. Xbox did not provide an update on Marvel’s Blade, leaving its status tied to the ongoing consultation rather than a new production announcement.
Rare’s position is different from the studios leaving Xbox. The cancellation of Everwild in 2025 led to redundancies, while reduced outsourcing and moving staff onto Sea of Thieves helped limit the impact. Rare also made cuts to its central operations team following Xbox’s Activision move and continues to work on other projects.
Booty said he would spend time with the studios during the week following Sept. 22. The wider Xbox organization will meet at an all-team town hall on Oct. 6 to review the reset and look ahead to its upcoming lineup.
How do you expect Xbox’s new studio structure to affect Halo, Forza, and Fable, and will Activision or Bethesda change how they approach PS5 games? Share your thoughts in the comments, and follow us on X, Bluesky, YouTube, Instagram, Steam, and Telegram.
