Xbox lays off 268 people and consolidates its studios as part of the “reset” announced over the summer. In a memo to staff that Xbox shared publicly, the division’s executive vice president (EVP) and chief content officer Matt Booty said the job cuts affected Halo Studios and other first-party developers, as well as Xbox Game Studios’ core functions management and team.
In July, Xbox laid off 1,600 people and announced it would cut the same number of jobs over the next year, in the interest of efficiency and higher profit margins. “The actions taken since July, including studio divestitures, bring us approximately three-quarters of the way through the previously announced restructuring,” Booty wrote.
It looks like Halo Studio is being hit the hardest by the latest removals, even if Xbox isn’t shutting it down completely. Booty said a small group “will continue to support the Halo community and games in the marketplace.” A new team being formed under Activision will produce the next Halo game. Activision also now oversees Rare and Age of Empires developer World’s Edge.
Obsidian, which Xbox recently commissioned to create a new Fallout game, is coming under the Bethesda umbrella, while King will oversee Microsoft Casual Games. As for Playground and Turn 10, these studios are merging and will continue to focus on Forza and Fable.
Booty noted that Xbox created Compulsion Games and Double Fine Productions as independent studios. Both have track funding and rights to their intellectual property and back catalogs.
Likewise, Undead Labs is now an independent studio again. State of decomposition 3 is still expected to arrive next year on Xbox and PC (including Game Pass) as well as PlayStation. Undead Labs said there should be a closed beta by the end of the year.
“Independence brings us closer to our community and allows us to focus on what matters most: creating the best games possible and earning the continued support of the people who choose to spend their time with us,” said Philip Holt, studio director of Undead Labs. “State of Decay exists because millions of players have made this choice over the years, and we are committed to honoring their trust.”
However, Xbox’s efforts to sell Ninja Theory have yet to be successful: two separate deals for the studio have fallen through and the studio is now at risk of being shut down. “We will now begin consultations with employees on a proposed closure while continuing to explore other avenues,” Booty wrote.
Xbox is also considering selling Arkane studios, based in Lyon. Under French law, Xbox had to enter a consultation period to explore options for the studio, such as selling it, splitting it up or shutting it down. Booty said the consultation is expected to continue until the end of 2026.
Updated, September 22, 2026, 11:29 a.m. ET: Added more details about Undead Labs’ independence.
