Xbox is going through another huge shake-up, and this one directly affects some of the biggest names in its gaming lineup. Microsoft has announced 268 additional role eliminations while reshaping how several major Xbox studios and franchises are managed.

The latest changes affect Halo Studios, Rare, World’s Edge, Obsidian Entertainment, Playground Games, Turn 10 Studios, Ninja Theory and other teams. The restructuring also changes who is responsible for some of Xbox’s biggest franchises, with Activision taking over development of the next Halo game, Bethesda expanding its oversight of Obsidian, and Playground Games and Turn 10 becoming a single studio.

For players, the biggest headline is obvious: the next Halo is moving to a brand-new Activision team. Meanwhile, Ninja Theory’s situation has become considerably more uncertain after two potential agreements to move the studio to new ownership fell through.

Xbox cuts 268 more roles as its major reset continues

The latest Xbox changes were announced on September 22, 2026, in a message to employees from Matt Booty, Microsoft’s president of game content and studios.

Xbox confirmed that 268 roles are being eliminated across Halo Studios, other first-party studios, and the Xbox Game Studios management and central functions layer. The company says the actions completed since July, including studio divestitures, have taken the broader restructuring roughly three-quarters of the way toward completion.

This is part of the much larger restructuring Xbox announced in July. At that time, Xbox said it planned to reduce its workforce by approximately 3,200 positions throughout FY27, with around 1,600 role eliminations announced immediately.

The July reset was presented as an effort to simplify Xbox’s organization, reduce management layers and concentrate investment around fewer priorities. Xbox CEO Asha Sharma said at the time:

“Our business today is not healthy.”

She also said:

“We must reset XBOX.”

The September announcement shows that reset is still very much underway, with Xbox continuing to reorganize its development network and publishing structure.

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Activision is now building the next Halo

For longtime Xbox players, the biggest change is happening with Halo.

Microsoft has confirmed that Activision will develop the next Halo title through a new, purpose-built team. The group is being assembled specifically for Halo and will operate separately from Activision’s ongoing Call of Duty development and plans.

That does not mean Halo Studios is disappearing completely.

A smaller team will remain at Halo Studios to support the Halo community and the games already on the market. In other words, the studio formerly known as 343 Industries still has a role within the franchise, but it will no longer lead development of the next major Halo game.

Activision president Rob Kostich also addressed the move, saying:

“We’re thrilled to welcome Halo, Rare, and World’s Edge to Activision.”

Kostich described the move as both an honor and a responsibility, pointing to the long history of those franchises and their global fan bases.

For Halo, he said the goal is to create “the greatest Halo game ever”, while remaining faithful to the universe and the elements that originally made the franchise popular with players.

He also confirmed that Activision has already started assembling the new purpose-built team, describing it as a group with unique capabilities and talent that is preparing to deliver the next chapter of the franchise alongside the community.

There is still one major piece missing, though: Xbox and Activision have not announced the full makeup of the new Halo team or provided a release window for the next game.

Rare and World’s Edge are also moving under Activision

Activision’s expanded role does not stop with Halo.

Rare, the studio behind Sea of Thieves, and World’s Edge, the studio responsible for the Age of Empires franchise, will also come under Activision’s remit.

That puts three major Xbox properties — Halo, Sea of Thieves and Age of Empires — under the same organizational umbrella.

The change does not mean Rare or World’s Edge are being shut down. Instead, Xbox is expanding Activision’s remit as part of its effort to consolidate its studio structure and bring groups that already work closely together into fewer business units.

For players, the immediate significance is less about those games disappearing and more about who will oversee their development and publishing operations going forward.

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Obsidian joins Bethesda while its projects continue

Another major internal shift involves Obsidian Entertainment.

The studio known for games such as The Outer Worlds, Avowed and Grounded is moving under Bethesda.

The important part for players is that Xbox has not announced the cancellation of Obsidian’s current projects. The developer will continue its existing work, including Grounded, while also working on a new Fallout project in collaboration with Bethesda Game Studios.

So, while Obsidian’s reporting structure is changing, its announced work is continuing.

The move also places one of Xbox’s major RPG developers closer to Bethesda’s existing group of studios and franchises.

Playground Games and Turn 10 are becoming one studio

Xbox is also combining two teams that racing fans already know extremely well.

Turn 10 Studios, the developer behind Forza Motorsport, and Playground Games, the studio behind Forza Horizon, will become a single studio focused on the Forza and Fable franchises.

The two teams have worked together as technological, creative and franchise partners for more than a decade. Xbox says the restructuring will now formally bring that work into one team.

Booty explained:

“These two studios have been technological, creative, and franchise partners for over a decade, and today’s changes will formally move their work into one team.”

The newly combined studio will therefore have responsibilities covering more than racing. Playground Games is also developing the next Fable, meaning the unified organization will work across both the Forza and Fable franchises.

And importantly, Xbox has not announced that Forza Motorsport has been cancelled. The change is a studio consolidation rather than an announcement that the racing series is ending.

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King takes over Microsoft’s casual games operations

Xbox is also changing the structure of its casual-games business.

King will expand its remit to include Microsoft Casual Games, bringing the two organizations responsible for Microsoft’s casual gaming operations together.

The official Xbox announcement describes the move as uniting two global leaders in casual game design and live operations.

That means Microsoft’s casual gaming operations are also being pulled into the broader strategy of operating fewer business units and concentrating publishing expertise.

Undead Labs becomes independent

Another major change concerns Undead Labs, the studio behind the State of Decay franchise.

Undead Labs has now fully transitioned away from Xbox management and become independent, following the broader divestiture strategy announced in July.

The good news for players waiting for the zombie survival sequel is that State of Decay 3 remains in development.

Xbox has confirmed that the game will still launch day one on Game Pass, although it will now have a new publisher.

This follows the earlier moves involving Compulsion Games and Double Fine Productions, which returned to management in August with their intellectual property, back catalogs and funding for their future projects.

So the studio network is not simply shrinking. Xbox is also changing which teams operate independently and which remain under Microsoft’s direct management.

Ninja Theory could close, but its fate is not final yet

The most uncertain situation involves Ninja Theory, the developer behind Hellblade: Senua’s Sacrifice and Senua’s Saga: Hellblade II.

Xbox had previously indicated that Ninja Theory would move toward new ownership. However, that transition has now hit a major roadblock.

According to Booty, two separate agreements involving Ninja Theory fell through.

Xbox will now begin consultation with employees regarding a proposed closure, while continuing to explore other possible paths forward.

That distinction matters.

Ninja Theory has not been officially confirmed as permanently closed as of September 23, 2026. The company is entering a consultation process over a proposed closure, meaning the studio’s ultimate fate remains unresolved.

The situation also comes alongside the ongoing consultation involving Arkane, which Xbox says is expected to continue through the end of the year.

For fans of Ninja Theory’s Hellblade games, this makes the studio one of the biggest unresolved stories within Xbox’s continuing reset.

Xbox’s restructuring is still far from finished

Taken together, these changes completely reshape parts of Xbox’s studio network.

The company originally announced its much larger restructuring in July, targeting approximately 3,200 role reductions throughout FY27. Around 1,600 roles were announced for elimination immediately, while several studios were also set to leave Xbox management.

The September update says the actions completed since July have brought Xbox roughly three-quarters of the way through that previously announced restructuring.

The company’s stated strategy is to operate with fewer business units, combine teams that already work closely together and focus its publishing expertise.

That strategy can now be seen across almost every major change announced this week:

• Activision is taking responsibility for Rare and World’s Edge and is building a new team for the next Halo.
• Halo Studios will retain a smaller team supporting existing games and the community.
• Bethesda is expanding its remit to include Obsidian.
• King is taking on Microsoft Casual Games.
• Playground Games and Turn 10 are becoming one studio focused on Forza and Fable.
• Undead Labs has become independent while State of Decay 3 remains in development and launches day one on Game Pass.
• Ninja Theory is entering consultation over a proposed closure after two agreements fell through.
• Arkane’s consultation remains underway.

The result is a dramatically different Xbox development structure heading into the final stretch of 2026.

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Xbox will address the reset at its October 6 town hall

Booty acknowledged the impact of the latest layoffs and restructuring in his message to Xbox employees.

He said:

“Today, our focus should be on supporting those affected and treating one another with care and respect.”

He also confirmed that he would spend time with Xbox’s studios during the following week before the company holds its October 6 town hall.

At that event, Xbox plans to come together as an all-Xbox team to reflect on its progress and look ahead to what Booty described as one of the strongest game line-ups in the company’s history.

For players, that means the Xbox story is far from finished. The next Halo now has a new development team under Activision, Rare and World’s Edge have a new organizational home, Obsidian is moving closer to Bethesda, Turn 10 and Playground are becoming one team, and Undead Labs is going independent.

At the same time, Ninja Theory’s future remains unresolved, with consultation now underway over its proposed closure.

Xbox’s reset is therefore still in motion, and more changes could follow as Microsoft works toward completing the broader restructuring announced earlier this year.

Disclaimer: This article reflects publicly available information and company statements verified as of September 23, 2026. The status of Ninja Theory and other restructuring plans may change as consultations and negotiations continue.

Sources

• Xbox Wire, September 22, 2026: “Continuing Our Reset” — Xbox’s official employee statement detailing the 268 job eliminations, studio reorganizations, Halo’s move to Activision, Obsidian’s move to Bethesda, the Turn 10/Playground merger, Undead Labs’ independence and Ninja Theory consultation. Read the official Xbox statement
• Xbox Wire, July 6, 2026: “Resetting XBOX” — Microsoft’s original announcement of the approximately 3,200-role FY27 restructuring and initial studio divestitures. Read the July Xbox restructuring announcement
• Ars Technica, September 22, 2026: Reporting on the restructuring and Activision’s new role with Halo, including comments from Activision president Rob Kostich. Read the Ars Technica report
• The Verge, September 22, 2026: Coverage of the Xbox restructuring, layoffs and studio realignment. Read The Verge’s report

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