Microsoft is restructuring its gaming division by cutting 268 roles across Halo Studios and other teams, while assigning Activision to build the next Halo title. The sweeping cost-cutting reset, led by Xbox leadership, reshuffles multiple first-party studios and leaves Halo Studios with a skeleton staff of about 20 employees.
Xbox Layoffs and Studio Restructuring Underway
Microsoft is pressing forward with a massive organizational reset across its gaming division, eliminating 268 roles in a fresh wave of cuts affecting Halo Studios, other first-party studios, and management layers. The downsizing is part of a broader fiscal-year reduction plan announced last July, which previously targeted 3,200 positions. According to Xbox Game Studios head Matt Booty, the company is now roughly three-quarters of the way through that restructuring.
The cuts hit Halo Studios hardest, leaving the former 343 Industries operating with only about 20 remaining employees. This follows a period of heavy scrutiny and the recent release of Halo: Campaign Evolved. The consolidation is driven by Xbox CEO Asha Sharma’s mandate to trim operational costs and refocus investments on higher-priority projects as the brand faces stiff competition from rival platforms.
Activision Takes Over the Next Halo Title
In a surprising shift for the franchise, Microsoft has tasked Call of Duty publisher Activision with building the next Halo game. Booty clarified that the project will be handled by a new, purpose-built team separate from ongoing Call of Duty operations. Meanwhile, a small remaining crew at Halo Studios will stick around to support the existing community and games currently on the market.
Before the studio was hollowed out, community leaks indicated that Halo Studios had grand designs for the franchise’s future. According to prominent community figure Rebs, the team had been exploring remakes of Halo 2 and Halo 3 alongside the early conceptual stages of Halo 7, which was pitched to Matt Booty and other Xbox executives with plans for day-one Campaign, PvP, PvE, and Forge modes. Leaked plans also pointed to a standalone spin-off campaign based on Eric Nylund’s novel Halo: First Strike. However, those concepts appear to have been shelved as development control shifts to Activision.
Bethesda, Obsidian, and Studio Hand-offs
The restructuring extends well beyond Halo, triggering a widespread game of musical chairs among Microsoft’s subsidiary developers. Starfield and Elder Scrolls developer Bethesda is expanding its remit to lead game development for Obsidian Entertainment. While Obsidian will maintain its current lineup—including Grounded and a collaborative Fallout project with Bethesda Game Studios—its integration signals a tighter operational hierarchy under Bethesda.
At the same time, Activision’s oversight is expanding beyond Halo to cover games from World’s Edge—the developer behind the Age of Empires franchise—and Rare.
- Compulsion and Double Fine have been returned to their original management, complete with IP, back catalogs, and runway funding.
- Undead Labs transitioned on similar terms to a new publisher, ensuring that State of Decay 3 will launch day one on Game Pass.
- Ninja Theory faces an uncertain future after two separate divestiture agreements fell through, prompting Microsoft to begin employee consultations on a proposed studio closure.
- Consultation regarding Arkane remains active and is scheduled to run through the end of the year.
Leadership Contention at Halo Studios
Even with Halo Studios reduced to a fraction of its former size, studio head Pierre Hintze remains in his position. According to community reports, Hintze pitched proposals to utilize AI for smaller projects and secure outsourced resources to keep the rumored remakes alive. Those survival bids face steep resistance, with reports indicating that Activision leadership wants little to do with the remaining studio head as the franchise enters its new era.
