Microsoft has announced a restructuring of Xbox Game Studios that cuts 268 roles across Halo Studios, first party teams and management layers. The plan moves several major franchises to new homes inside the company while a small group of studios prepares to leave Microsoft ownership entirely.
Quick Facts: What is happening: Microsoft is restructuring Xbox Game Studios and cutting 268 roles. When: the company announced the plan on September 24, 2026. Biggest franchise moves: development of the next mainline Halo shifts to a newly formed team inside Activision, Activision takes over management of Rare and Worlds Edge, and Obsidian Entertainment moves under Bethesda Softworks to collaborate on a new Fallout project. Studios going independent: Compulsion Games, Double Fine Productions and Undead Labs. At risk: Ninja Theory faces a proposed closure after two sale agreements fell through. Still on track: State of Decay 3 remains planned as a Day One Game Pass launch.
Halo gets a new home inside Activision
The most surprising part of the overhaul concerns Microsoft flagship shooter series. Development of the next mainline Halo title is shifting to a newly formed and dedicated team within Activision, according to the announcement. A downsized core group at Halo Studios will stay in place to maintain live services and community support for existing games, but the future of the franchise now sits with a different team. The move puts one of Xbox most important series under the same roof as the Call of Duty publisher, which Microsoft acquired to strengthen its first party lineup. For a series that has defined the Xbox brand since the original console, a change of stewardship on this scale is rare. The announcement did not give a release window for the next entry, so fans should treat any dates circulating online with care until the new team shares its own roadmap.
Rare, Worlds Edge, Obsidian and the Forza teams change places
Halo is not the only franchise changing hands. Under the new structure, Activision will take over management of Rare, the studio behind Sea of Thieves, and Worlds Edge, the team that oversees Age of Empires. Role playing specialist Obsidian Entertainment has been moved under Bethesda Softworks, where it will collaborate on a new Fallout project alongside its existing catalog. On the casual side, Microsoft Casual Games joins mobile publisher King, which fits a portfolio built around phone friendly hits. Racing fans are affected too. Forza Horizon creator Playground Games is merging with Forza Motorsport developer Turn 10 Studios to form a single studio focused on Forza and Fable. Each of these moves consolidates related teams under one roof, which Microsoft presents as a way to share technology and staff more easily across projects that serve similar audiences.
Three studios go independent as Ninja Theory faces closure talks
The announcement also updated the status of several studios that were already on the path out of Microsoft. Compulsion Games, Double Fine Productions and Undead Labs have successfully transitioned to independent management while retaining their back catalogs and intellectual property. That detail matters because it means the games those teams made stay with the teams that made them. State of Decay 3 remains planned as a Day One Game Pass launch under a new publisher, which suggests the publishing deal survived the ownership change intact. Readers who followed our earlier State of Decay 3 testing coverage will remember how long that sequel has been in the works. The darker news concerns Ninja Theory, the developer of Hellblade. After two prospective sale agreements fell through, Microsoft has entered formal consultations regarding a proposed closure of the studio while continuing to explore alternative options. Discussions regarding the status of Arkane Lyon are set to continue through the end of 2026, so that team future remains undecided for now.
What the shake-up means for Xbox players
For players, the practical takeaway splits into short term reassurance and longer term questions. In the short term, the published release slate looks intact. State of Decay 3 is still pointed at a Day One Game Pass launch, live service games keep their support teams, and no cancellations were announced as part of this plan. The longer term questions center on creative direction. A new Halo team inside Activision, a combined Forza studio also tasked with Fable, and an Obsidian tied to Fallout all raise fair questions about how much each franchise will change once new leadership sets priorities. Restructures of this size also tend to slow decision making for a few months while reporting lines settle, so expect quiet periods from the affected teams before new details emerge. The 268 affected roles span development and management, which signals that Microsoft is trimming overhead as well as reshuffling creators. As always with corporate announcements, the full effect will only become clear when the reorganized teams start shipping work, and our recent Xbox showcase recap shows how much of the brand momentum still rests on first party delivery.
How many jobs is Microsoft cutting at Xbox?
Microsoft says 268 roles are affected across Halo Studios, first party teams and management layers as part of the Xbox Game Studios restructuring announced on September 24, 2026.
Is State of Decay 3 still coming to Game Pass on day one?
Yes. The announcement states that State of Decay 3 remains planned as a Day One Game Pass launch under a new publisher, even as developer Undead Labs transitions to independent management with its catalog and IP intact.
Who is making the next Halo game now?
Development of the next mainline Halo title is moving to a newly formed, dedicated team within Activision. A smaller core group at Halo Studios will continue live services and community support for existing Halo games.
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