Xbox Restructuring Changes Everything: Halo Moves to Activision as 268 More Jobs Are Cut

Microsoft has announced another sweeping reorganization of its Xbox division. The changes eliminate 268 roles, reshape the structure of several major first-party studios and put development of the next Halo game in the hands of a new team created within Activision.

The measures were detailed by Xbox Chief Content Officer Matt Booty in a message sent to employees and officially published on Xbox Wire on September 22, 2026.

According to Booty, actions completed since July, including studio divestitures, have brought Microsoft roughly three-quarters of the way through its previously announced restructuring. The company says the new organization is intended to operate fewer business units, align teams that already work closely together and concentrate its publishing expertise.

Activision will develop the next Halo

The most symbolic change involves Halo, one of the franchises most closely associated with the Xbox brand.

Activision will expand its remit to include World's Edge and Rare and will also take responsibility for developing the next Halo title.

Microsoft says the next Halo will be led by a new purpose-built team inside Activision. Crucially, that team will operate separately from ongoing development and plans for Call of Duty.

Halo Studios will not disappear entirely. A small team will remain in place to support the Halo community and the Halo games currently on the market.

The decision represents a significant structural change for the franchise. Rather than concentrating the next major project inside Halo Studios, Microsoft is using Activision's organization to lead its development.

Xbox is eliminating another 268 roles

The reorganization also includes the elimination of 268 positions.

According to Microsoft's official announcement, the cuts affect Halo Studios, other first-party studios and the Xbox Game Studios management and central functions layer.

Booty said the actions completed since July, including studio divestitures, have brought Xbox roughly three-quarters of the way through the restructuring that had already been announced.

The executive said the company's immediate focus is supporting the employees affected by the changes.

Playground Games and Turn 10 are becoming one studio

Another major change affects two teams closely connected to some of Microsoft's biggest franchises.

Playground Games and Turn 10 Studios will come together as a single studio focused on the Forza and Fable franchises.

Microsoft noted that the two teams have already been creative and franchise partners for more than a decade. The restructuring formally moves their work into one organization.

Turn 10 is historically associated with the Forza Motorsport series, while Playground Games developed the Forza Horizon series and is working on the Fable franchise.

Obsidian moves under Bethesda

Bethesda will also expand its remit to include Obsidian Entertainment.

Xbox says Obsidian will continue working on its current projects, including Grounded, as well as a new Fallout project being made in collaboration with Bethesda Game Studios.

The move formally brings Obsidian closer to the organization responsible for Fallout, a franchise with which the studio has a long history after developing Fallout: New Vegas.

King, meanwhile, will expand its remit to include Microsoft Casual Games. Microsoft describes the move as bringing together two global leaders in casual game design and live operations.

Rare and World's Edge move under Activision

Activision's expanded role goes beyond the next Halo.

Its remit will also include Rare and World's Edge. Rare is responsible for Sea of Thieves, while World's Edge oversees the Age of Empires franchise.

That means several well-known Xbox properties will now sit under a different business structure within Microsoft's gaming organization.

Microsoft says the purpose of the reorganization is to strengthen its franchises and games by operating fewer business units, aligning groups that already work closely together and focusing its publishing expertise.

Ninja Theory faces a proposed closure

Ninja Theory's situation is one of the most consequential parts of the restructuring.

According to Matt Booty, two separate agreements to divest the studio fell through. Microsoft will now begin consultation with employees on a proposed closure while continuing to explore other possible paths.

That distinction matters: Ninja Theory's closure should not yet be treated as completed. Microsoft has announced a consultation over a proposed closure and explicitly says it is continuing to explore alternatives.

Ninja Theory is best known for the Hellblade series and became part of Xbox after Microsoft acquired the studio in 2018.

Arkane's situation also remains unresolved. Xbox confirmed that consultation involving the studio is continuing and is expected to run through the end of 2026.

Undead Labs leaves Xbox, but State of Decay 3 remains on Game Pass

While some discussions remain open, other studio transitions have now been completed.

Compulsion Games and Double Fine returned to management in August with their intellectual property, back catalogs and runway funding.

Microsoft has now confirmed that Undead Labs successfully completed a similar transition.

Despite leaving Microsoft's internal studio structure, State of Decay 3 will remain connected to the Xbox ecosystem through a new publishing arrangement and will launch on Game Pass on day one.

Xbox's internal structure is changing dramatically

Taken together, the announcements show that Microsoft's current Xbox restructuring extends far beyond a single round of job cuts.

Halo is moving to a dedicated Activision team. Rare and World's Edge are moving into Activision's remit. Obsidian is moving under Bethesda. King is taking on Microsoft Casual Games. Playground and Turn 10 are becoming one organization. Undead Labs has left Microsoft, while Ninja Theory faces a proposed closure.

At the same time, another 268 positions are being eliminated across the gaming division.

Microsoft says its objective is to reduce the number of business units, align teams that already collaborate and concentrate publishing expertise. The practical consequences of that strategy will become clearer as projects including the next Halo, Fable, Forza, State of Decay 3 and the new Fallout project progress under the reorganized structure.

The next public milestone will come on October 6, when Xbox plans to hold an all-team town hall to reflect on the restructuring's progress and discuss what comes next for the division.