Activision Takes Over Halo as Microsoft's Xbox Reset Guts Studios

Microsoft confirmed Activision will develop the next Halo game amid 268 Xbox layoffs, a Ninja Theory closure plan, and a sweeping studios restructure.

Microsoft announced a major restructuring of its Xbox studios on September 22, 2026, eliminating 268 roles across Halo Studios, other first-party studios, and Xbox Game Studios management functions. Xbox chief content officer Matt Booty said in an internal memo that Activision will develop the next Halo title, led by a new purpose-built team that is separate from ongoing Call of Duty plans, while a small team at Halo Studios continues supporting games already in market. Activision is also taking on the Sea of Thieves and Age of Empires franchises, with Rare's UK team and World's Edge joining the Activision side of Xbox.

Halo has been Xbox's flagship franchise since Microsoft bought original developer Bungie in 2000, and Microsoft created 343 Industries, later renamed Halo Studios, to steward the series after Bungie split away in 2007. Less than two years ago the studio announced plans for multiple new Halo games built on Unreal Engine 5, following the troubled launch of Halo Infinite and problems with this year's Halo: Campaign Evolved remake. IGN notes it is unclear whether any of that Unreal Engine work will carry forward, and whether Activision plans a reboot or will rotate Halo into a release schedule modeled on Call of Duty's unbroken 20-year run of annual releases. Activision president Rob Kostich called the ambition to make 'the greatest Halo game ever' a bold one the franchise deserves.

The restructure also confirmed that Obsidian is moving under Bethesda to work in close partnership on a new Fallout title, whose form remains unspecified. Forza Motorsport developer Turn 10 and Playground Games are merging into a single studio focused on Forza Horizon and Fable, and Microsoft's casual games unit, responsible for Solitaire, Mahjong, and Minesweeper, is moving from Bethesda to King. Compulsion and Double Fine already returned to management with their IP and back catalogs, and Undead Labs has transitioned on similar terms, with State of Decay 3 set to launch day one on Game Pass with a new publisher, per The Verge's report on Booty's memo.

Two separate sale agreements for Ninja Theory fell through, and Microsoft said it will begin consultation with employees on a proposed closure while exploring other paths forward. According to GAMingbible, the Hellblade developer's planned third entry, Senua, was reportedly in development for 2027 and its future is now in doubt. Consultation with Arkane remains underway and is expected to continue through the end of the year. This is the second round of Xbox layoffs this year: The Verge reports today's cuts bring 2026's total to nearly 1,900 roles, out of 3,200 Microsoft has said will be affected through its 2027 financial year, with more than 1,000 roles still unannounced and Microsoft saying it is roughly three-quarters of the way through the restructuring.

Booty framed the goal as strengthening franchises by operating fewer business units, aligning groups that already work closely together, and focusing publishing expertise. IGN reports the reset is the most significant restructure in Microsoft gaming's history, part of new Xbox boss Asha Sharma's drive to reach a billion people each day through video games by 2030 after continued poor financial results and collapsing profit margins, with Microsoft doubling down on big franchises such as Halo, Minecraft, and Fallout. Booty said he will visit studios over the coming week and that an October 6 town hall will look ahead to what he called one of the strongest game lineups in Xbox history.