Microsoft Cuts 268 More Xbox Jobs, Hands Next Halo Game to Activision as Ninja Theory Faces Closure

Microsoft cut 268 jobs across Xbox Game Studios on Tuesday, September 22, and handed the next Halo game to Activision, the Call of Duty publisher it bought for $68.7 billion in 2023, according to GeekWire and The Verge.

The cuts hit Halo Studios (formerly 343 Industries), other first-party teams, and Xbox Game Studios' management layer, according to a memo from Xbox chief content officer Matt Booty that was published by The Verge, Engadget, and Business Insider. Booty said the moves bring Microsoft "roughly three-quarters of the way through" the restructuring it announced in July.

GeekWire reported the total cuts on Tuesday run to fewer than 600 employees globally, with about 300 in Washington state, spreading beyond Xbox into cloud, AI, marketing, and research roles. Business Insider put the figure at around 500, mostly in gaming, with a smaller number in other Microsoft units.

Halo Goes to Activision

A new team inside Activision, separate from the Call of Duty staff, will build the next mainline Halo game. Activision president Rob Kostich said in a statement carried by the BBC, The Verge, and GeekWire that the company has "already begun assembling a purpose-built team, unique in capability and talent," with the goal to "make the greatest Halo game ever."

Halo Studios itself will keep only a reduced team to support existing games, including the recently released Halo: Campaign Evolved, and the community. Activision is also taking over Rare, the UK studio behind Sea of Thieves, and World's Edge, the Redmond studio behind Age of Empires, per GeekWire and The Verge.

Jez Corden of Windows Central called the shift "a dramatic move," telling the BBC that "Halo was once to Xbox what Mario is to Nintendo, but years of mismanagement have eroded that." Christopher Dring, editor-in-chief of The Game Business, told the BBC that handing Halo to Activision "makes sense" given that Halo hasn't been Xbox's crown jewel "for more than a decade."

Ninja Theory on the Brink, Arkane Still in Limbo

The Hellblade studio Ninja Theory is now headed toward closure. Booty's memo says two separate agreements to sell the studio fell through, and Microsoft will begin consultation with employees on a proposed shutdown while still hunting for other options, according to Engadget and Business Insider.

Arkane Studios, based in Lyon, remains in a French-law-mandated consultation process that Booty said is expected to run through the end of 2026, per Engadget.

On the brighter side for some studios: Compulsion Games and Double Fine Productions returned to independent management in August with their IP and back-catalog rights intact, and Undead Labs has now done the same, landing a new publisher for State of Decay 3, which is still slated to launch on Xbox, PC, and PlayStation next year with a closed beta expected by the end of 2026, according to Engadget and Undead Labs studio head Philip Holt.

Obsidian Entertainment is moving under Bethesda to work on a new Fallout title, Microsoft Casual Games is shifting to Candy Crush maker King, and Turn 10 Studios is merging with Playground Games to focus on Forza and Fable, GeekWire reported.

The Bigger Picture

This all traces back to July, when Xbox chief executive Asha Sharma announced what she called "the most significant restructure in Xbox history," cutting 1,600 jobs immediately as part of a plan to eliminate roughly 3,200 positions, about 20% of the division, by the end of Microsoft's fiscal 2027, according to the BBC and GeekWire. Sharma said at the time that Microsoft's gaming division had not been "healthy," and told the BBC in August that rising computing prices and hardware costs were adding further pressure on the company.

Firstpost reported that Microsoft CEO Satya Nadella and CFO Amy Hood had at one point considered separating parts of the gaming business entirely, and that Microsoft has already cut vendor spending by 50% and trimmed management layers at Xbox as part of the same push for profitability.

Microsoft spent tens of billions buying up studios, including the $7.5 billion ZeniMax deal and the $68.7 billion Activision Blizzard acquisition, and is now consolidating that empire because it didn't produce the growth executives wanted. That's a company eating the cost of its own expansion bets. The people losing jobs are the ones absorbing it. Microsoft's July severance package offered laid-off U.S. employees up to 39 weeks of base pay, according to documents reviewed by Business Insider.

Stocktwits reported Microsoft shares were down about 1.3% Tuesday amid the announcement, though no source tied that specific move directly to the layoffs alone.

Booty told employees in his memo that Xbox will hold an "ALL-XBOX" town hall on October 6 to "reflect on our progress and look ahead to one of the strongest game lineups in our history." Whether that lineup includes a Halo game Activision can actually deliver, and whether Ninja Theory survives in any form, are questions Microsoft has not yet answered.