Xbox Game Studios is shrinking toward nothing. Two rounds of layoffs this year have left the first-party banner a fraction of its old size, and most of the work is moving to Activision and Bethesda, which now look like the company’s two main publishers.
The latest cuts came on Sept. 22. In a message shared to Team Xbox employees, chief content officer Matt Booty said Xbox was cutting another 268 jobs as it keeps restructuring its publishing efforts. He also said Ninja Theory faces closure after failing to find a buyer, and that talks to offload Arkane are still ongoing.
That was only the second phase. On July 6, Xbox announced an overhaul that would shed thousands of jobs and cut 20% of the organization over 12 months. The first phase moved a handful of studios out from under the Xbox banner and hit others with deep cuts. Booty said Xbox is only three-quarters of the way through the restructuring, so the company you see next year won’t look much like the one that went into 2026.
Here’s where every remaining studio stands.
Halo Studios took the hardest hit
This is the biggest story of the September round. A good chunk of the 268 jobs came from Halo Studios. The rest hit “other first-party studios” and Xbox Game Studios management.
The timing is rough. The cuts landed a few months after Halo: Campaign Evolved launched, and that game teased a Halo 2 remake. The studio still exists, but it looks set to work as a support team for Activision while Activision makes its own Halo game. Halo Studios has reportedly been cut down to a small support team. Nobody knows yet how many people are left or what they’ll work on.
Activision keeps collecting franchises
Activision gets more important every time Xbox restructures. It was mostly spared this summer and avoided cuts again in September. It’s also taking on more: World’s Edge and Rare now sit under its banner.
And Activision is becoming the new home of Halo, too. It’s building the series’ next game. Two years ago that sentence would have sounded like a joke.
Rare is under new management and still a mystery
Rare is one of the studios moving under Activision, and apart from Sea of Thieves, nobody knows what it’s working on. Everwild is gone. Rare had layoffs in 2025 when Everwild was canceled, so it was already a smaller team before this latest shuffle.
Xbox is focused on IP right now, so it’s possible the company is eyeing the dormant Banjo-Kazooie IP for a revival. But that’s speculation. Nothing more.
Blizzard gets a pass (and a busy schedule)
Blizzard is in the same spot as Activision. It keeps avoiding major cuts, since Xbox seems more interested in trimming Xbox Game Studios than the big publishers it bought.
That makes sense. Blizzard just came off a BlizzCon packed with announcements: new World of Warcraft, Diablo and StarCraft games, plus some multimedia IP deals. That lineup makes Blizzard a workhorse for Xbox for the next four years, which is when StarCraft is currently scheduled to launch.
King quietly got promoted
Here’s a change from the summer that got little attention: King, the Candy Crush developer, started reporting directly to Asha Sharma, who was then the new Xbox CEO. So it isn’t a shock that King gets more responsibility in the September shakeup.
Microsoft Casual Games now falls under King’s “remit.” If that label doesn’t ring a bell, it runs games like Solitaire and Mahjong. With King in charge, expect Microsoft to lean harder into casual mobile games.
Bethesda lost a lot, then got handed more
Bethesda has had a bumpy stretch. Its studios were hit hard this summer, with Id Studios and ZeniMax Online Studios both taking significant layoffs that affected Doom and The Elder Scrolls Online. Xbox also said it wanted to sell Arkane. Booty’s September message said there’s no buyer yet, and the search will continue through the end of 2026.
This time Bethesda got more to manage. It now oversees Obsidian, which had its own job cuts this summer. The logic holds up: Xbox has confirmed that Obsidian is making the next Fallout game while Bethesda keeps working on the long-awaited Elder Scrolls 6.
Obsidian swears it’s still Obsidian
The org chart is the main thing changing at Obsidian, at least for now. In a leaked memo to Bethesda staff, Bethesda president Jill Braff said Obsidian would keep its “creative identity” through the transition, even as CEO Feargus Urquheart starts reporting directly to Braff.
Booty’s memo said Obsidian will keep working on the Grounded series along with the new Fallout game.
Forza’s two studios are finally merging
Xbox is combining Playground Games and Turn 10 Studios, and this one was a long time coming. The two studios make separate Forza franchises, and Turn 10 was hit hard by layoffs in 2025.
The merger is another sign that Forza is a big priority for Microsoft. No surprise there, since Forza Horizon 6 has been one of Xbox’s few real hits in recent years.
The Coalition is safe until E-Day ships
The Coalition is one of the few studios still under Xbox Game Studios. For now. The Gears of War studio is weeks away from shipping Gears of War: E-Day, and it makes sense not to blow things up right before the finish line.
It didn’t come through clean, though. Story director Juan Vaca was laid off in this wave. With more cuts coming, The Coalition’s future looks tied to how E-Day does. It’s easy to picture the series ending up under Activision someday, with or without The Coalition. For the moment, the studio is carrying on as normal.
Mojang looks secure, mostly
Mojang Studios started reporting directly to Sharma this summer, the same as King, and it also looks safe as one of the few developers left under the Xbox banner. The fine print is that Booty said some “first-party studios” were affected, and there aren’t many of those left. So Mojang and The Coalition may have had more layoffs than anyone has reported so far.
Whatever happened inside, the release date hasn’t moved. Minecraft Dungeons 2 launches Sept. 29, one week after the cuts.
