Xbox’s restructuring has entered another phase, with Microsoft eliminating 268 roles and reorganizing several major first-party studios.
The latest changes put Activision in charge of the next Halo game; Playground Games and Turn 10 are being combined into a single studio, and Bethesda’s now set to include Obsidian. Microsoft says the changes are intended to reduce organizational complexity and concentrate resources around its biggest franchises.
The announcement follows Xbox’s larger restructuring plan from July, when Asha Sharma announced approximately 3,200 role eliminations during fiscal 2027. According to Xbox chief content officer Matt Booty, the latest changes leave the company “roughly three-quarters of the way through previously announced restructuring.”
Xbox Cuts Another 268 Roles
The latest cuts affect Halo Studios, other first-party teams, and the Xbox Game Studios management and central functions layer. The 268 positions are part of the broader restructuring announced in July. Sharma described that plan as “the most significant restructure in XBOX history,” with approximately 1,600 role eliminations taking place immediately and further changes continuing through fiscal 2027.
Microsoft’s explanation for the restructuring centers on the cost and complexity of its gaming organization. Sharma said Xbox was operating at margins “3-10x lower than comparable platform and publishing businesses,” while noting that investments in Game Pass, multiplatform releases, and a broader content portfolio hadn’t produced the expected growth.
She also said some areas had as many as 14 layers of management. The July plan called for those layers to be reduced to no more than five, and three where possible.
Activision Takes Over Halo
The most prominent change involves Halo. Activision will oversee development of the next mainline Halo game through a new team separate from its Call of Duty operations. Booty said the team will be “separate from ongoing development and plans for Call of Duty,” while a smaller group at Halo Studios will continue supporting existing Halo games and their communities.
Activision is also expanding its responsibilities to include Rare and World’s Edge, bringing franchises such as Sea of Thieves and Age of Empires under the same organizational umbrella. Booty said the aim is to strengthen Xbox’s franchises “by operating fewer business units, aligning groups that already work closely together, and focusing our publishing expertise.”
Playground and Turn 10 Become One Studio
Playground Games and Turn 10 will combine into a single studio focused on Forza and Fable. Playground is responsible for Forza Horizon and is developing the upcoming Fable, while Turn 10 has historically led the Forza Motorsport series. Booty said the two studios have been “creative and franchise partners for over a decade,” making the merger an extension of an existing working relationship.
Bethesda is undergoing a similar expansion, with Obsidian joining its group of studios. Obsidian will continue working on Grounded and a new Fallout project being developed alongside Bethesda Game Studios.
King will also take responsibility for Microsoft Casual Games, consolidating Microsoft’s casual-game operations.
Ninja Theory Faces Proposed Closure
The restructuring is also changing the status of studios Microsoft previously planned to divest. Compulsion Games and Double Fine returned to independent management in August, taking their intellectual property, back catalogs and funding for future projects with them. Undead Labs has now completed a similar transition and will continue developing State of Decay 3 with a new publisher, with the game remaining a day-one Game Pass release.
Ninja Theory’s future is less certain. Microsoft says two potential agreements for the studio fell through and it will begin consultation with employees over a proposed closure. “We will now begin consultation with employees on a proposed closure while continuing to explore other paths forward,” Booty said.
Arkane’s consultation process remains ongoing and is expected to continue through the end of 2026.
The Last Word
Xbox’s latest restructuring goes beyond layoffs, reshaping how its first-party portfolio is organized. The 268 additional cuts bring the broader restructuring roughly three-quarters of the way to completion, while Activision takes on Halo, Rare and World’s Edge.
Playground and Turn 10 are becoming one studio, Bethesda is absorbing Obsidian, and Compulsion, Double Fine and Undead Labs have moved toward independence. Ninja Theory, meanwhile, faces a proposed closure. The changes reflect Asha Sharma’s stated aim of creating “a flatter organization” as Microsoft shifts from years of studio expansion toward a more concentrated Xbox portfolio.
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Image via Microsoft
