Xbox is reportedly heading into another painful week. A new report claims that a second wave of layoffs is about to land, affecting “hundreds” of Xbox employees, and that Microsoft also plans to consolidate several of its own studios – in other words, merge them under shared banners to shrink the division’s footprint. The information is said to come from someone briefed on Xbox’s plans, and no specific studios were named.
What Already Happened at Xbox in 2026
This wouldn’t come out of nowhere. February brought a leadership shake-up, with Phil Spencer and Sarah Bond leaving Xbox and Asha Sharma stepping in as the division’s new CEO. In July, Sharma officially confirmed that a total of 3,200 Xbox employees would lose their jobs by the end of fiscal year 2027, and 1,600 of those cuts happened on the same day the announcement went out.
Four studios also parted ways with Xbox in that round. Double Fine and Compulsion Games returned to independent development, while Ninja Theory and Undead Labs signed new contracts under new owners. If you want more background on how Sharma runs the division day to day, we covered her habit of answering support tickets in a separate article.
Halo Under Activision Blizzard?
In a ResetEra thread discussing the report, well-known leaker NateTheHate backed up the claims and added a detail of his own: Halo is supposedly going to be consolidated under Activision Blizzard alongside other, unnamed studios. Some teams are also said to be merged together inside Xbox itself, again without names attached.
Asked whether 343 Industries – now operating as Halo Studios – will keep working on the Halo franchise or be moved to a different IP, NateTheHate said he doesn’t know what happens to the studio. So for now, the future of the people who actually make Halo is the biggest open question in the whole story.
Why Microsoft Calls This a “Reset”
In her official July 6 statement, Sharma described the cuts as part of a need to “reset” Xbox as both a brand and a company. According to her, the problem is a lack of growth from big investments like Xbox Game Pass and the multiplatform strategy, which left the business with “margins that are 3-10x lower than comparable platform and publishing businesses.” Judging by this week’s rumored moves, that reset is now in full swing.
What It Means for You as a Player
- At least another 1,600 jobs are confirmed to go by the end of fiscal year 2027 – that part isn’t a rumor.
- Studio consolidation usually means longer development cycles, quietly cancelled projects and reshuffled release plans.
- If Halo really does move under Activision Blizzard, it could change who leads the series and how often new entries show up.
- Nothing about the second wave has been officially announced, so treat the details as unconfirmed until Microsoft speaks.
It’s worth keeping a cool head here. Industry rumors fall apart regularly – see how quickly Bungie shut down the Marathon merger rumor – and the full scope of Xbox’s plans still hasn’t been confirmed by anyone at Microsoft.
Where to Read Next
Xbox isn’t the only place where the industry is shrinking; we also reported on a fresh round of Build A Rocket Boy layoffs. For everything else from the business side of gaming, browse our gaming news archive.
FAQ
The report speaks of “hundreds” of employees. No exact number has been given, and Microsoft hasn’t officially announced this wave at all.
Asha Sharma confirmed in July that 3,200 Xbox employees will lose their jobs by the end of fiscal year 2027. Of those, 1,600 were laid off on the day of the announcement.
The report doesn’t name them. Leaker NateTheHate claims Halo will be consolidated under Activision Blizzard alongside other unnamed studios, with further mergers happening inside Xbox.
That’s unclear. Asked whether the studio formerly known as 343 Industries will stay on Halo or move to a different IP, NateTheHate said he doesn’t know its fate.
Sharma pointed to weak growth from investments like Xbox Game Pass and the multiplatform push, which she said left margins 3-10 times lower than comparable platform and publishing businesses.