Xbox Game Studios is nearly gone as Microsoft's reset hits the three-quarter mark

Microsoft's Xbox reset pushed further this week with 268 more layoffs, hitting Halo Studios, other first-party developers, and Xbox Game Studios management teams. Xbox chief content officer Matt Booty confirmed the cuts bring the overall restructuring to roughly three-quarters complete — meaning more reductions are still coming before the process wraps.

The scale of the dismantling is staggering. Of the 14 studios that made up Xbox Game Studios in 2021, only three active game-making teams remain: Playground Games, inXile Entertainment, and The Coalition. Halo Studios — formerly 343 Industries — has been gutted and reduced to a support role for Activision, which is now leading the next Halo game. Rare and Age of Empires developer World's Edge have also moved under Activision. Obsidian Entertainment shifted to Bethesda. Turn 10 has been absorbed by Playground Games. Undead Labs, like Double Fine and Compulsion Games before it, was sold back to its own management and is now employee-owned. Ninja Theory still has no buyer and faces closure if that doesn't change. Microsoft Casual Games was handed off to King, the Candy Crush studio. Xbox Game Studios Publishing remains, handling titles like Ninja Gaiden 4 and Kojima Productions' upcoming OD and Physint.

Xbox CEO Asha Sharma, who replaced Phil Spencer earlier this year, has been direct about why this is happening: Game Pass didn't deliver the growth Microsoft needed, the pivot away from exclusives weakened the core business, and the AI-driven memory and component shortage hit the hardware side hard. Spencer and Sarah Bond's era of aggressive studio acquisitions and service bets created some value, Sharma acknowledged, but not enough to satisfy shareholder expectations. The total planned cut across Microsoft's fiscal year 2027 cycle is 3,200 jobs — 1,600 went in July, 268 more this week, leaving roughly 1,332 still to come by June 30, 2027. Reporter Jason Schreier has indicated Blizzard layoffs are imminent, arriving just after the studio's big BlizzCon announcements.

The human cost is sharp. Halo Studios cinematic director Josh Daniels was promoted and laid off in the same week — a detail that captures just how chaotic the process has been on the ground. Workers have reportedly been left scrambling for information through unofficial channels, and Bethesda staff were told their jobs were safe right before cuts landed in July. With Microsoft posting $90 billion in quarterly revenue and nearly $36 billion in net profit, the contrast between corporate performance and studio-level carnage has drawn widespread criticism. The reset isn't over yet.