Microsoft’s Xbox division has been through a series of major restructurings since the Activision Blizzard acquisition closed. The latest waves in 2025–2026 have involved thousands of job cuts, studio closures or spin-outs, game cancellations, and a clear shift toward concentrating resources on fewer, bigger franchises under stronger publishing umbrellas (Activision, Bethesda, King). Here’s a rundown of the key developments with sources.
The layoff waves and studio impacts
- January 2024: Roughly 1,900 roles cut across Xbox and Activision Blizzard shortly after the deal closed. Studios including Arkane Austin (post-Redfall) and Tango Gameworks were among those affected; Roundhouse was merged.
- July 2025: Microsoft announced company-wide cuts of around 9,000 roles. Xbox was hit hard: The Initiative was closed and its*Perfect Dark reboot canceled; Rare’s long-in-development Everwild was canceled; Turn 10 (Forza Motorsport) reportedly lost a large percentage of staff; Raven Software and others were also impacted. Support for Warcraft Rumble was wound down.
- July 2026: Xbox announced plans to cut ~3,200 roles over the fiscal year (about 20% of the gaming division in some reports), with ~1,600 effective immediately. Several studios were divested or allowed to go independent (Double Fine and Compulsion keeping their IP; Ninja Theory and Undead Labs put up for sale with funding to finish Senua and State of Decay 3; Arkane Lyon entered consultation under French law). No publicly announced first-party games were canceled in that specific round.
- September 22, 2026: An additional 268 roles eliminated across Halo Studios, other first-party studios, and Xbox Game Studios management/central functions. This brought the post-July actions to roughly three-quarters of the planned restructuring. Ninja Theory’s sale agreements fell through and consultation on a proposed closure began; Arkane Lyon consultation continued.
These cuts sit against a backdrop of underperforming or disappointing titles that contributed to the pressure for change. Redfall (Arkane Austin) was widely panned and led to studio impacts. Starfield had a mixed reception and did not fully meet internal expectations in some reports. Other projects (including some from Obsidian and partners) were later cited internally as failing to hit sales or Game Pass engagement targets. Canceled titles like Perfect Dark and Everwild further highlighted the portfolio pruning.
Halo moves to Activision
As part of the September 2026 reorganization, Activision expands its remit to include Rare (Sea of Thieves) and World’s Edge (Age of Empires). Most notably, Activision will develop the next mainline Halo title with a new, purpose-built team that is separate from Call of Duty work. A small remaining team at Halo Studios (formerly 343 Industries) will continue supporting the community and existing games (Halo Infinite, Halo: Campaign Evolved, etc.).
Activision president Rob Kostich described the goal as making “the greatest Halo game ever, worthy of its universe and legacy.” This is a major shift for one of Xbox’s flagship franchises after years of mixed results under 343/Halo Studios.
Studio reorganizations
- Obsidian Entertainment moves under Bethesda Softworks (it continues current projects including Grounded and a collaborative new Fallout project with Bethesda Game Studios).
- Microsoft Casual Games moves under King.
- Playground Games (Forza Horizon, Fable) merges with Turn 10 Studios to focus on the Forza and Fable franchises.
The overall direction from Xbox leadership (including CEO Asha Sharma and chief content officer Matt Booty) has been to operate fewer business units, align related teams, and concentrate on priority franchises.
Recent announcements from Bethesda and Blizzard
Bethesda has emphasized its core RPG franchises amid the resets:
- The Elder Scrolls VI is the primary development focus for Bethesda Game Studios.
- Fallout 5 is in pre-production.
- Remasters of Fallout 3 and Fallout: New Vegas are in the works.
- A new Fallout project is underway in collaboration with Obsidian (now under Bethesda’s expanded remit). Early work was already in progress before the September move.
- Ongoing support continues for *Fallout 76*, *Starfield*, etc.
Blizzard used BlizzCon 2026 (September) to outline longer-term plans:
- Diablo V targeting Spring 2029 (set after Sanctuary has fallen).
- A new open-world StarCraft shooter aiming for 2030.
- World of Warcraft: Forever (a third experience alongside Modern and Classic, focused on the Vanilla era with new zones, quests, etc.) launching November 4, 2026 (beta started mid-September).
- Additional updates for Diablo IV, Overwatch, Hearthstone, Heroes of the Storm, and a new Warcraft III: Reforged campaign.
The bigger picture
Xbox leadership has framed these moves as necessary to improve focus, margins, and long-term competitiveness after years of heavy investment, mixed commercial results on some big releases, and a challenging industry environment. Critics see the successive rounds of cuts and the concentration of power under Activision/Bethesda as shrinking the breadth of Xbox’s first-party identity. Supporters argue it is overdue prioritization of proven franchises and more efficient publishing structures.
The October 6, 2026 all-Xbox town hall was positioned as a moment to reflect on progress and look ahead to what leadership calls one of the strongest upcoming lineups in the division’s history.
Sources for the latest restructuring details include the official Xbox Wire post “Continuing Our Reset” by Matt Booty (Sept 22, 2026) and reporting from outlets covering the earlier 2025–2026 waves.
And, even as Gears of War: E-Day launched on October 6, 2026 to generally favorable reviews (Metacritic scores in the high 80s, with many calling it a strong return to form for the series), the mood inside developer The Coalition has been tense because what matters is the reception among gamers which was awful. Staff have openly expressed fears of further job cuts immediately after launch - mirroring the contractor reductions that hit Halo Studios shortly after Halo: Campaign Evolved shipped in July 2026, and the far larger September restructuring that reduced Halo Studios to a small support team while handing the next mainline Halo to Activision. The story director on E-Day was already among those laid off weeks before release, and sources inside the studio have said they expect additional reductions or possible reorganization once the game is out and any post-launch bonuses are settled. Whether E-Day’s critical reception will protect the team the way some hoped remains an open question in the current climate of Xbox’s ongoing “reset.”