Xbox Cuts 268 More Jobs, Hands Halo and Rare to Activision in Sweeping Restructure

Microsoft has confirmed a second major wave of Xbox layoffs in 2026, eliminating 268 more roles as it continues what the company is calling a "reset" of its gaming business. The cuts follow an earlier round in July that eliminated 1,600 positions, and they come alongside sweeping structural changes that touch nearly every corner of Xbox Game Studios. Among the most dramatic announcements: the Halo franchise and legendary UK studio Rare have both been transferred to Activision, which will now develop the next mainline Halo title. Ninja Theory has been proposed for closure, Obsidian Entertainment is being folded into Bethesda, and the Forza and Fable studios are being merged. Undead Labs is being divested entirely.

The scope of the reorganization has left Xbox Game Studios a shadow of its former self. What was once a portfolio of more than a dozen development teams has been reduced to fewer than five, according to reporting from Kotaku. Halo Studios, formerly known as 343 Industries, was effectively gutted without ever releasing a single original title under its new name. The studio shipped Halo: Campaign Evolved as its lone output before Xbox handed the franchise to the Call of Duty publisher. That decision has divided fans sharply, with some welcoming a fresh start for the series and others alarmed at seeing a storied franchise placed in Activision's hands.

The human cost of the restructuring was thrown into sharp relief by Halo Studios cinematic director Josh Daniels, who publicly revealed he was promoted and then laid off within the same week. His situation drew widespread attention as a symbol of the chaos engulfing Xbox's internal studios. Former Blizzard president Mike Ybarra offered a more optimistic reading, calling the dismantling of Halo Studios "the best news in a decade plus" and praising Xbox for what he described as a necessary reset for the franchise. For the hundreds of developers who lost their jobs, however, the mood was considerably less celebratory.

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