Xbox has laid off 268 employees in the second wave of a 3,200-role restructuring announced in July 2026, with chief content officer Matt Booty confirming the cuts on Xbox Wire.

The latest redundancies hit Halo Studios, other first-party teams, and Xbox Game Studios management and central functions. An initial 1,600 cuts in July hit Obsidian, ZeniMax Online Studios, id Software and others, alongside divestments of Double Fine and Compulsion Games.

Booty said the division is now "roughly three-quarters of the way through" its previously announced plan. He added: "I am deeply grateful for what our colleagues have built, and I know how difficult today will be for those leaving and the teams around them."

What happens to Halo?

Activision, acquired by Xbox in 2023 for nearly $70 billion, is now developing the next Halo title through a "new, purpose-built team" at the Call of Duty publisher. A small Halo Studios contingent will continue supporting Halo products already in market.

Both Rare and World's Edge have been moved under the Activision umbrella. That places three formerly independent creative studios under one publisher at a moment Microsoft is explicitly trying to shrink overhead.

Which studios are being divested — and which is shutting?

Undead Labs has "successfully transitioned" out of Xbox on terms comparable to Double Fine's July deal, Booty said. The State of Decay maker retained its IP, back catalog, and runway funding. Booty confirmed: "Undead Labs has now successfully transitioned on similar terms and, with a new publisher, will release State of Decay 3 day one on Game Pass."

Ninja Theory did not reach a deal. Two separate agreements collapsed, and the Senua's Saga developer will enter consultation on a proposed closure. Booty said: "We will now begin consultation with employees on a proposed closure while continuing to explore other paths forward."

Arkane remains in "lengthy consultation" with no transaction finalized.

Which Xbox studios are merging?

Several internal teams are folding together to reduce Xbox's operating footprint:

• Bethesda will house Obsidian, which continues Grounded and an upcoming Fallout title co-developed with Bethesda Game Studios.
• King will absorb Microsoft Casual Games. Booty called the pairing a union of "two global leaders" in casual game design and live operations.
• Playground Games (Fable) and Turn 10 (Forza) will operate as a single studio. Booty: "These two studios have been creative and franchise partners for over a decade, and today's changes will formally move their work into one team."

What about Blizzard?

An email from a Blizzard senior leader, viewed by Game Developer and confirmed by an Xbox representative, told staff the World of Warcraft maker is not impacted by "today's announcements." The phrasing leaves future cuts open.

In July, Xbox workers told Game Developer that five rounds of Microsoft mass layoffs across three years had gutted internal studios of senior talent, with some accusing management of failing to treat departing staff with dignity. The new round sharpens that criticism.

Booty's restructuring timeline runs to the end of Microsoft's fiscal year. The decisions worth watching next: whether Arkane closes a divestment deal before consultation windows expire, and whether the Activision-led Halo team clears an internal milestone without pulling senior staff from Call of Duty live operations.