Microsoft has confirmed the elimination of 268 additional roles across its gaming division, marking a critical phase in a broader organizational “reset” that is fundamentally altering the structure of Xbox Game Studios. The move, confirmed on September 22, 2026, primarily affects Halo Studios, various first-party teams, and several management layers as the company moves toward a more centralized publishing model.
The latest staff reductions are part of a multi-year restructuring plan aimed at cutting a total of 3,200 positions by Summer 2027. With approximately 1,600 roles eliminated in July 2026 and this latest round of 268, Microsoft is now roughly 75% of the way through its target reduction. Under the leadership of Xbox CEO Asha Sharma, the strategy emphasizes profitability through the consolidation of legacy internal studios into the management frameworks of its major acquisitions, Activision and Bethesda.
This centralization extends to other veteran Microsoft studios as well. Rare, the developer behind Sea of Thieves, and World’s Edge, which oversees the Age of Empires series, will now report directly to Activision. Simultaneously, Obsidian Entertainment—the studio behind Avowed and The Outer Worlds—is being folded into Bethesda Softworks’ management remit. This transition also includes a collaboration between Obsidian and Bethesda Game Studios on a new Fallout project, even as Obsidian continues its ongoing work on Grounded.
Further consolidation is taking place within the racing and RPG sectors. Playground Games and Turn 10 Studios are formally merging into a single unit dedicated to the Forza and Fable franchises. This merger is intended to streamline resources between the two UK-based developers that have long shared the ForzaTech engine.
The restructuring has also led to the proposed closure of Ninja Theory, the developer of Hellblade: Senua’s Sacrifice. According to reports, the studio has entered a mandatory consultation period with employees after two separate attempts to divest the studio to external buyers collapsed.
While some studios face closure or consolidation, others are exiting the Microsoft ecosystem entirely. Undead Labs, the developer of the State of Decay series, has successfully transitioned out of Microsoft ownership to become an independent entity. Despite this divestiture, Microsoft has confirmed that State of Decay 3 remains a day-one release for Xbox Game Pass.
