Microsoft is cutting another 268 jobs from its Xbox division as the company pushes ahead with one of the biggest reorganisations of its gaming business in years. The latest reductions affect Halo Studios, other first-party developers and teams working across Xbox Game Studios management and central operations.
The new Xbox layoffs follow the loss of 1,600 positions announced in July. Microsoft had previously outlined plans to remove about 3,200 roles from the gaming division during its 2027 financial year, which runs through June 2027. With the latest changes and several studio divestments already completed, Xbox says it is now roughly three-quarters of the way through that restructuring.
The job cuts are only one part of the shake-up. Microsoft is also changing which studios control some of its biggest gaming franchises, including Halo, Fallout, Forza and Age of Empires.
Another 268 Xbox Jobs Are Being Removed
The latest cuts will be spread across several parts of the gaming organisation rather than one individual studio.
Halo Studios is among the teams affected. Jobs are also being removed from other first-party studios and from the management structure that sits above Microsoft’s development teams.
The latest Microsoft gaming layoffs add to a difficult year for Xbox employees. Around 1,600 roles were eliminated during the first major phase of the restructuring in July, when the company also began changing the shape of its studio portfolio.
Microsoft’s wider target is to cut roughly 3,200 Xbox positions by the end of its 2027 financial year.
The company has described the process as a reset intended to simplify the business, reduce the number of separate operating groups and concentrate resources around games and franchises it believes can deliver stronger results.
Activision Will Take Charge of the Next Halo Game
One of the biggest changes involves Halo.
The franchise has been closely associated with Xbox since Microsoft’s first console launched in 2001. Going forward, however, Activision will establish a new team responsible for developing the next major Halo title.
Halo Studios will remain in operation but with a smaller role. Its remaining team will focus on supporting existing games, live services and the current Halo player community.
The shift is significant because Activision is best known for Call of Duty, another of the world’s largest first-person shooter franchises.
Microsoft bought Activision Blizzard in 2023 in a deal worth about $69 billion. Three years later, the company is now using that organisation to take greater responsibility for some of Xbox’s most recognisable intellectual property.
The Xbox restructuring also gives Activision oversight of Rare and World’s Edge, the studios associated with Sea of Thieves and Age of Empires.
Obsidian Is Moving Under Bethesda
Obsidian Entertainment is also changing position inside Microsoft.
The studio will become part of Bethesda while continuing work on its existing projects. Those include Grounded and a new Fallout project being developed in collaboration with Bethesda Game Studios.
The pairing makes sense from a franchise perspective.
Obsidian has history with Fallout after developing Fallout: New Vegas before Microsoft owned either company. Bethesda remains the main studio associated with the wider Fallout series.
Bringing the teams closer could reduce some of the organisational separation that existed when Microsoft’s various gaming acquisitions continued operating as largely independent businesses.
That appears to be one of the main ideas behind the current reset: fewer isolated units and more development groups operating under common structures.
Forza Studios Are Being Combined
Microsoft is applying the same approach to its racing business.
Playground Games and Turn 10 Studios are being combined into a single studio structure. Together, the teams will work across the Forza and Fable franchises.
Turn 10 is traditionally associated with Forza Motorsport, while Playground created Forza Horizon and is developing the next Fable game.
The two studios have collaborated on the wider Forza franchise for years, so Microsoft is now formalising that relationship as part of the broader Xbox studio restructuring.
King, the developer behind Candy Crush, is also taking responsibility for Microsoft Casual Games.
These moves show that the company is not simply cutting headcount. It is reorganising development and publishing responsibilities across the businesses it acquired over the past several years.
Some Studios Have Already Left Microsoft
The reset has also involved Microsoft reducing the number of studios it owns directly.
Double Fine Productions and Compulsion Games are among the teams that have moved out of the Xbox structure and returned to independent operation.
Undead Labs is also moving through a sale process.
The situation around Ninja Theory is more uncertain. Attempts to find a buyer for the studio have reportedly not resulted in a completed transaction, leaving Microsoft to consider what happens next.
The studio is known for games including Hellblade and Senua’s Saga: Hellblade II.
Changes of this scale underline how different the Xbox organisation could look once the restructuring is finished. Microsoft spent years expanding its collection of developers through acquisitions. It is now deciding which teams should remain, which should be combined and where individual franchises belong.
Xbox Revenue Has Been Under Pressure
The restructuring comes after a difficult period for Microsoft’s gaming results.
In the quarter ended June 2026, Xbox content and services revenue declined 10% from the previous year. Microsoft also recorded impairment charges connected with the gaming business.
Gaming revenue had already fallen during earlier quarters as hardware sales weakened and content performance came under pressure.
Microsoft has said it is making changes across its content portfolio, platform and operations with the aim of returning Xbox to growth during fiscal 2027.
That helps explain why the latest Xbox layoffs go well beyond a straightforward attempt to reduce payroll.
The company is reshaping how games are developed, published and managed after years of expensive acquisitions and expansion.
Microsoft Wants Fewer Layers and Stronger Franchises
The clearest pattern across the changes is consolidation.
Halo is moving closer to Activision. Obsidian is joining Bethesda. Rare and World’s Edge are moving under Activision’s wider structure. Playground Games and Turn 10 are being brought together.
Microsoft appears to believe that having fewer separate business units will make decisions easier and allow resources to be concentrated around major franchises.
Whether that leads to better games will take much longer to judge.
For employees, the immediate impact is another round of job losses after an already difficult summer. For players, the effects will eventually appear in the studios and teams responsible for some of Microsoft’s most important franchises.
The current Xbox restructuring is now about three-quarters complete, but it is already changing the identity of Microsoft’s gaming organisation.
By the time the process finishes, Xbox will still own many of the same famous names. The teams developing them, however, may be organised very differently from the ones players knew only a year ago.
Source
Moneycontrol: Xbox layoffs: Microsoft cuts hundreds of jobs as studios undergo major restructuring
