Xbox Game Studios is being whittled down toward nothing. After two waves of layoffs this year, the first-party label is a fraction of what it once was, and most of its work is shifting to Activision and Bethesda, which now look like the company’s two main publishers.
The most recent round landed on Sept. 22. Chief content officer Matt Booty told Team Xbox employees in a message that another 268 jobs were being eliminated as Xbox continues to restructure its publishing operations. He added that Ninja Theory is facing closure after no buyer came forward, and that discussions about offloading Arkane are still ongoing.
And that was just phase two. Back on July 6, Xbox unveiled an overhaul designed to shed thousands of jobs and cut 20% of the organization over 12 months. The first phase moved several studios out from under the Xbox banner and made deep cuts at others. According to Booty, the company is only three-quarters of the way through the restructuring, so next year’s Xbox won’t look much like the one that entered 2026.
Below is a rundown of where each remaining studio now stands.
Halo Studios absorbed the heaviest blow
No part of the September round is bigger. A significant share of the 268 lost jobs came out of Halo Studios, while the remainder fell on “other first-party studios” and Xbox Game Studios management.
The timing is harsh. The cuts arrived only a few months after the launch of Halo: Campaign Evolved, a game that teased a Halo 2 remake. Halo Studios hasn’t been shut down, but it appears set to act as a support team for Activision while Activision builds its own Halo title. Reports say the studio has been reduced to a small support team. How many people remain, and what they’ll be working on, is still unknown.
Activision keeps adding franchises to its pile
Each time Xbox restructures, Activision’s importance grows. The publisher was largely spared over the summer and escaped cuts once more in September. Its responsibilities are expanding, too: World’s Edge and Rare now operate under its banner.
Activision is also becoming Halo’s new home, as it’s developing the series’ next game. Two years ago, that would have sounded like a joke.
Rare has new bosses and remains an enigma
Rare is among the studios shifting to Activision, and beyond Sea of Thieves, no one knows what it’s developing. Everwild has been scrapped. The studio went through layoffs in 2025 when Everwild was canceled, meaning it was already a leaner operation before this latest reshuffle.
With Xbox currently focused on IP, the company could be considering a revival of the dormant Banjo-Kazooie IP. That, however, is pure speculation and nothing more.
Blizzard escapes the axe and stays busy
Blizzard finds itself in the same position as Activision, continuing to dodge major cuts. Xbox appears more interested in slimming down Xbox Game Studios than the large publishers it acquired.
It’s a logical choice. Blizzard is fresh off an announcement-heavy BlizzCon that brought new World of Warcraft, Diablo and StarCraft games, along with a few multimedia IP deals. That slate turns Blizzard into an Xbox workhorse for the next four years, which is when StarCraft is currently slated to launch.
King’s quiet promotion
One summer change flew mostly under the radar: King, the studio behind Candy Crush, began reporting directly to Asha Sharma, who was the new Xbox CEO at the time. Against that backdrop, it’s hardly surprising that King picked up more responsibility in the September shakeup.
Microsoft Casual Games is now part of King’s “remit.” If the name is unfamiliar, it’s the group behind games like Solitaire and Mahjong. With King at the helm, Microsoft is likely to push harder into casual mobile games.
Bethesda took losses, then gained responsibilities
It’s been a turbulent period for Bethesda. Its studios were hit hard over the summer, as Id Studios and ZeniMax Online Studios both saw significant layoffs that affected Doom and The Elder Scrolls Online. Xbox also said it wanted to sell Arkane. Booty’s September message noted that no buyer has emerged yet, and the search will go on through the end of 2026.
This round, Bethesda was handed more to oversee: Obsidian, which went through its own job cuts this summer, now falls under it. The reasoning makes sense, since Xbox has confirmed Obsidian is building the next Fallout game while Bethesda continues work on the long-awaited Elder Scrolls 6.
Obsidian insists its identity is intact
For the time being, the org chart is the main thing changing at Obsidian. In a memo to Bethesda staff that later leaked, Bethesda president Jill Braff said Obsidian would retain its “creative identity” through the transition, even as CEO Feargus Urquheart begins reporting directly to Braff.
According to Booty’s memo, Obsidian will continue developing the Grounded series alongside the new Fallout game.
Forza’s two developers finally become one
Xbox is merging Playground Games and Turn 10 Studios, a move that was a long time coming. The two studios handle separate Forza franchises, and Turn 10 suffered heavy layoffs in 2025.
The combination further signals that Forza is a major priority for Microsoft. That’s no shock, given that Forza Horizon 6 has been one of Xbox’s few genuine hits in recent years.
The Coalition is protected until E-Day is out
The Coalition remains one of the few studios still under Xbox Game Studios, at least for now. The Gears of War developer is only weeks from shipping Gears of War: E-Day, and disrupting the team so close to the finish line would make little sense.
Still, the studio didn’t come away untouched: story director Juan Vaca was laid off in this wave. With further cuts on the way, The Coalition’s future appears linked to E-Day’s performance. It isn’t hard to imagine the franchise eventually landing under Activision, with or without The Coalition. For now, the studio is proceeding as usual.
Mojang appears secure, for the most part
Like King, Mojang Studios began reporting directly to Sharma this summer, and it also seems safe as one of the few developers still under the Xbox banner. The caveat: Booty said some “first-party studios” were affected, and not many of those remain. That means Mojang and The Coalition may have seen more layoffs than have been reported so far.
Whatever went on internally, the release date is unchanged. Minecraft Dungeons 2 arrives Sept. 29, one week after the cuts.