Xbox Hands Halo to Activision as 268 Jobs Go

Xbox is cutting 268 more jobs and handing the next Halo game to Activision, as Matt Booty said the reset is about three-quarters done. The Xbox chief content officer put both moves in the same staff note on September 22, under the heading Continuing Our Reset.

The headcount is the part that travels. The consequential change is who now owns Xbox’s oldest shooter, plus Rare and World’s Edge, after Microsoft spent $68.7 billion to buy Activision Blizzard in 2023.

Activision Will Make the Next Halo Game

Booty wrote that Activision will expand its remit to World’s Edge, the Age of Empires studio, and to Rare, the Sea of Thieves studio. Activision will also develop the next Halo title, led by a new, purpose-built team kept apart from Call of Duty. A small team at Halo Studios will keep supporting the Halo community and the games already on sale.

Halo Studios, formerly 343 Industries, shipped Halo: Campaign Evolved in July. It does not close. It also no longer makes the next mainline game, the first time that work has left the in-house Halo studio since Bungie departed in 2007. Xbox has not set a release date for the Activision project.

Rob Kostich, Activision’s president, framed the brief as a return to what players loved, not as a Call of Duty reskin.

For Halo, our goal is clear: make the greatest Halo game ever, worthy of its universe and legacy, while staying true to what made players love it in the first place. We have already begun assembling a purpose-built team, unique in capability and talent, ready and excited to deliver this next chapter with the community.

Rob Kostich, President, Activision

A new team can staff up fast. It cannot inherit a decade of shipping knowledge that just walked out of Redmond. Josh Daniels, a former cinematic director at Halo Studios, put the human version in one line on LinkedIn: “Promoted and laid off in the same week is pretty wild.”

Microsoft did not buy Activision in 2023 to run Age of Empires. It is now the publisher of record for Halo, Sea of Thieves, and Age of Empires, the franchises Xbox already owned. That is the second move inside the 268-job note, and it is the one that redraws the map.

Booty Says Xbox Is Three-Quarters Through

Booty told staff Xbox is eliminating 268 roles across Halo Studios, other first-party studios, and the Xbox Game Studios management and central functions layer. The actions finished since July, including studio sales, bring the company “roughly three-quarters of the way through previously announced restructuring.”

On July 6, Xbox CEO Asha Sharma, who took the job from Phil Spencer in February, said she would reduce the team by about 3,200 roles through fiscal 2027, which ends June 30, 2027. About 1,600 of those cuts landed that day. Four studios were told they would leave Xbox. Microsoft also cut about 4,800 jobs companywide on July 6, about 2.1% of its workforce.

Booty did not publish a remaining headcount. Because he counted the studio sales inside the three-quarters figure, the leftover quarter is not a simple subtraction from 3,200. It is still a real quarter of a plan Sharma called the most significant restructure in Xbox history.

The same note folded Xbox’s remaining first-party map into three big publishers and one merged racing studio.

WHERE THE STUDIOS NOW SIT

Booty said the goal is fewer business units, groups that already work together, and tighter publishing. Mojang and King already report to Sharma, a July change that treated Minecraft and Candy Crush as platforms rather than as ordinary studios.

Two Ninja Theory Deals Fell Through

The September note also closed, or failed to close, the studio sales Sharma started in July. Compulsion Games and Double Fine went back to their own managers in August, keeping their IP, catalogs, and funding. Undead Labs has now moved on similar terms and will still put State of Decay 3 on Game Pass on day one.

Ninja Theory, the Cambridge studio behind Hellblade and the upcoming Senua game, did not get that landing. Booty wrote that two separate agreements fell through. Xbox will begin talks with staff on a proposed closure while it keeps looking for another path. Arkane’s required talks in France remain open and are expected to run through the end of 2026.

STUDIO EXITS FROM THE JULY PLAN

• Double Fine: Independent again, with its catalog and runway funding intact.
• Compulsion Games: Same independent terms, completed in August.
• Undead Labs: New publisher; State of Decay 3 still due on Game Pass at launch.
• Ninja Theory: Two buyer deals collapsed; Xbox has opened talks on a proposed closure.
• Arkane: Works Council talks continue, with no end date before year-end.

Sharma’s July letter said none of Xbox’s publicly announced first-party games or projects were being cancelled as part of those cuts. Ninja Theory’s proposed closure is a later failure of the sale track, not a July cancellation. Senua’s status now sits inside those staff talks, not inside a finished deal.

Why Sharma Called Xbox Unhealthy

Sharma told staff in July that Xbox was not healthy, with margins 3 to 10 times lower than comparable platform and publishing businesses. That diagnosis still sits under this week’s 268 cuts. She said Xbox entered this console generation with a smaller install base and a higher cost base, then bet on Game Pass, multi-platform releases, and a wider slate. Those bets “created meaningful value,” she wrote, and “did not grow at the pace we expected.”

Our business today is not healthy. We are operating at margins that are 3-10x lower than comparable platform and publishing businesses. We entered Gen 9 with a smaller install base and a higher cost structure. To grow, we bet on Game Pass, multi-platform, and a broader portfolio of content. While those businesses have created meaningful value, they did not grow at the pace we expected. As that happened, our core business weakened, and we added more teams, more investment, and more time, hoping for a better outcome. And now the industry is facing the most severe hardware crisis in its history. We must reset XBOX.

Asha Sharma, CEO, Xbox, July 6 staff memo

THE JULY RESET CALENDAR

1. February 2026: Sharma becomes Xbox CEO, succeeding Phil Spencer.
2. June 10, 2026: Sharma and Booty send the Next 100 Days: Xbox Reset note to staff.
3. July 6, 2026: About 1,600 roles go that day; Sharma publishes the 3,200-job FY27 plan and names four studios leaving.
4. August 2026: Compulsion and Double Fine complete their returns to independent management.
5. September 22, 2026: 268 more roles go; Halo, Rare, and World’s Edge move under Activision; Ninja Theory talks begin.
6. October 6, 2026: Booty has called an all-Xbox town hall to review progress and the game lineup.

Since 2018, she wrote, Xbox had expanded its studio list while the industry’s monthly output passed the prior ten years combined. In a typical year the company “lost 64 cents for every dollar we invested.” Platform teams were 40% larger than at the start of the generation, even as the player base and playtime fell. Work in some places passed through as many as 14 management layers. The reset caps those layers at five, and at three where possible, cuts vendor spend 50%, and puts Helen Chiang in a new chief operating officer job with profit-and-loss control across content, hardware, platform, and services.

The hardware crunch she named is real, and Microsoft’s own cloud build is part of the same parts market that has raised console costs. Sharma still used it as a reason to shrink Xbox, not as a reason to pause the cuts.

Microsoft Posted $35.8 Billion in Profit

The parent company is not short of cash. For the quarter ended June 30, 2026, Microsoft reported $90.0 billion in quarterly revenue, up 18%, and net income of $35.8 billion, up 31% on a GAAP basis. Operating income was $40.6 billion. For the full fiscal year, revenue was $331.8 billion and net income was $133.7 billion.

MICROSOFT’S JUNE QUARTER, NEXT TO XBOX

• Company revenue: $90.0 billion, up 18% from a year earlier.
• Company net income: $35.8 billion, up 31% on a GAAP basis.
• Microsoft Cloud: $59.3 billion, up 27%.
• Xbox content and services: down 10% in the same quarter; More Personal Computing revenue was $12.9 billion, down 4%.

The earnings release said severance and impairment charges in Xbox offset part of a $3.2 billion gain on Microsoft’s Anthropic stake. Satya Nadella, Microsoft’s chief executive, used the call to talk about Azure, which passed $100 billion in annual revenue, and about Copilot seats. Gaming was not the growth story.

On September 25, three days after the 268-job note, Nadella discussed Xbox on the Sources Podcast and praised the same cuts staff were still absorbing.

There’s some amount of streamlining the team is doing, and Asha is doing, which is great to see. I feel fantastic about the IP we have right now. If I look at the studios, the IP portfolio we have, and our ability to then take that and produce great games going forward, I feel fantastic.

Satya Nadella, CEO, Microsoft, on the Sources Podcast

He also said Xbox still has to invent a sustainable model that delivers games to more people on PCs and consoles. Feeling fantastic about the IP is easier when the IP can be reassigned. Halo’s next game now belongs to a publisher Microsoft already paid $68.7 billion to own.

The Remaining Quarter Still Includes Blizzard

Tuesday’s memo did not name Blizzard. Games reporter Jason Schreier, speaking on the 8-4 Play podcast around those same days, said the opposite about the months ahead: “The Blizzard layoffs are coming and imminent.” Blizzard had just come off a mid-September BlizzCon that unveiled Diablo V, a StarCraft shooter, and World of Warcraft: Forever. Schreier said those shows were planned long before Sharma’s July cuts, not staged to blunt them.

Booty’s three-quarters line leaves a last slice of the FY27 plan unspent. That slice can still include Blizzard, more first-party thinning, and whatever Ninja Theory’s talks produce. Shannon Loftis, the former World’s Edge studio head and an Xbox vice president, publicly attacked Sharma’s leadership after the Age of Empires studio was folded into Activision. A Halo Studios employee also said Halo Fest 2026 is still on, which matches Booty’s line that a small in-house team will keep serving the live community.

WHAT WE KNOW

• Confirmed cuts: 268 roles on September 22, after about 1,600 on July 6, inside Sharma’s plan of about 3,200 through FY27.
• Halo’s next game: Activision builds it on a new team; Halo Studios supports games already in market.
• Ninja Theory: two buyer deals failed; Xbox has opened talks on a proposed closure.

WHAT IS UNCONFIRMED

• Blizzard: Schreier says cuts are imminent; Xbox has not announced a number, a date, or the teams.
• The last quarter: Booty gave no remaining headcount, and studio sales are counted inside the three-quarters figure.
• Ninja Theory’s end state: closure is proposed, not finished, and Booty said other paths are still being explored.

Booty said he would spend the next week with studios and that on October 6 the company will hold an all-Xbox town hall to review progress and “one of the strongest game lineups in our history.” The remaining quarter of Sharma’s plan runs until June 30, 2027. Halo’s next chapter will be written at Activision. The 268 people who left this week will not be in that room.