Updated 25 September 2026, 20:00
Xbox is going through another rough week. What started as talk of a second wave of layoffs and a plan to squeeze several first-party studios under shared banners is now official. Microsoft confirmed hundreds of additional job cuts, shut down Halo Studios and reshuffled who owns which team – with Obsidian Entertainment landing inside Bethesda.
268 people out, roughly 800 still to go
The new round hits 268 people specifically: staff from Halo Studios, other teams and the management layer of the gaming division. Put that next to the plan Microsoft announced in July 2026 – 3,200 Xbox jobs gone by the end of fiscal year 2027 – and the company is now about three quarters of the way through it. Around 800 more cuts are still ahead.
New Xbox CEO Asha Sharma has been blunt about the reasoning: the division wasn’t running efficiently, and some parts of it had stacked up as many as 14 layers of management. The target is three to five. The July cuts were framed the same way – Sharma described them as a "reset" of Xbox as both a brand and a business, pointing to weak growth from big bets like Xbox Game Pass and the multiplatform strategy, and to margins she called 3-10x lower than comparable platform and publishing businesses. The follow-up announcement landed in a September post.
Halo Studios is gone, the series moves under Activision
The hardest part of the story: Halo Studios, the team formerly known as 343 Industries, has been shut down. Only a small crew stays behind to support the community and the games that are already out. Development of the next mainline Halo game moved under Activision, and we covered that handover in detail in Activision takes over Halo.
Rare (Sea of Thieves) and World’s Edge (Age of Empires) moved under Activision as well. Microsoft Casual Games goes to King. Playground and Turn10 are merging into a single new studio that will carry the Forza and Fable series. The reorganization also touched The Coalition, inXile and Obsidian. If you want to keep tabs on where the series goes next, our Halo news archive collects everything we publish about it.
Obsidian inside Bethesda: what Jill Braff’s memo says
Bethesda boss Jill Braff sent staff a memo explaining Obsidian’s new position in the company after the reorganization. Obsidian is working on a new Fallout game, but Bethesda Game Studios keeps leading the franchise itself – the series isn’t changing hands, it’s simply getting a second team working inside it.
The memo also sketched out Bethesda’s roadmap:
- The Elder Scrolls 6 is currently the studio’s main project.
- Fallout 5 is in pre-production.
- Remasters of Fallout 3 and Fallout: New Vegas are confirmed.
- Work on Starfield continues, but no sequel has been confirmed.
No release dates were attached to any of it, so read the list as a statement of direction rather than a schedule.
How Xbox got here in 2026
None of this came out of nowhere. February brought a leadership shake-up: Phil Spencer and Sarah Bond left Xbox and Asha Sharma became the division’s new CEO. In July, Sharma confirmed the 3,200 job cuts by the end of fiscal year 2027, with 1,600 of them landing on the day of the announcement. Four studios also parted ways with Xbox in that round – Double Fine and Compulsion Games went back to independent development, while Ninja Theory and Undead Labs signed new contracts under new owners.
What it means for you as a player
At least 1,600 more jobs are confirmed to go by the end of fiscal year 2027 – that part was never a rumor. Studio consolidation usually means longer development cycles, quietly cancelled projects and reshuffled release plans. With the next mainline Halo under Activision and Halo Studios closed, expect changes in who leads the series and how often new entries show up. On the Bethesda side, the practical takeaway is simple: Fallout stays with Bethesda Game Studios, and Obsidian adds a second front to the franchise.
It’s still worth keeping a cool head about everything Microsoft hasn’t spelled out. Plenty of specifics around team assignments remain unconfirmed, and plans like these tend to shift.
Fancy something lighter from the Halo world after all this? We also wrote about the Master Chief statue from Prime 1 Studio.
FAQ
268 employees from Halo Studios, other studios and the management layer of the gaming division. That fulfills roughly three quarters of the July 2026 plan to cut 3,200 jobs by the end of fiscal year 2027, leaving about 800 more to come.
Microsoft shut the studio down. Only a small team remains to support the community and the already released games. Development of the next mainline Halo game moved under Activision.
Obsidian was folded into Bethesda as part of the Xbox studio reorganization. Bethesda boss Jill Braff explained the studio’s new position in a memo to staff.
Obsidian is working on a new Fallout game, but Bethesda Game Studios continues to lead the franchise. Fallout 5 is in pre-production and remasters of Fallout 3 and Fallout: New Vegas are confirmed, with no release dates announced.
Rare (Sea of Thieves) and World’s Edge (Age of Empires) moved under Activision, Microsoft Casual Games goes to King, and Playground and Turn10 are merging into a new studio for Forza and Fable. The Coalition and inXile were affected too.
Bethesda says work on Starfield continues, but no sequel has been confirmed. The Elder Scrolls 6 is currently the studio’s main project.