Activision Takes Over Halo Development as Microsoft Restructures Xbox Studios

Microsoft announced a significant restructuring of its Xbox division today, consolidating studios and eliminating 268 roles across first-party teams and management. The reorganization marks the second major round of cuts this year and brings the total impact to approximately 1,900 positions, with Microsoft indicating it is roughly three-quarters through previously announced restructuring plans.

The most significant change involves Activision taking over development of the next major Halo title. A purpose-built team within Activision, separate from Call of Duty development, will lead the project. Halo Studios, formerly known as 343 Industries, will transition to a smaller operation focused on supporting existing games like Halo Infinite and Halo: The Master Chief Collection.

"For Halo, our goal is clear: make the greatest Halo game ever, worthy of its universe and legacy, while staying true to what made players love it in the first place," said Activision president Rob Kostich. "We have already begun assembling a purpose-built team, unique in capability and talent, ready and excited to deliver this next chapter with the community."

This represents a major shift for the franchise less than two years after Microsoft moved Halo development to Unreal Engine 5. The decision comes after Halo Studios experienced leadership changes and previous layoffs in recent years.

Beyond Halo, Microsoft is consolidating multiple studios under Activision's leadership. World's Edge, the developer behind Age of Empires, is joining Activision, as is Rare's UK team, which will operate Sea of Thieves under the Activision banner.

Other major changes include Bethesda expanding to include Obsidian Entertainment, which will continue work on Grounded and collaborate with Bethesda Game Studios on a new Fallout project. Turn 10 Studios and Playground Games are merging into a single studio focused on Forza and Fable franchises after over a decade of close collaboration.

Microsoft's casual games division, responsible for titles like Solitaire, Mahjong, and Minesweeper, is transferring from Bethesda to King, uniting the company's casual gaming operations.

The restructuring also includes updates on previous studio divestitures. Compulsion Games, Double Fine Productions, and Undead Labs have transitioned to independent operations with their intellectual property and funding. Undead Labs will release State of Decay 3 day one on Game Pass with a new publisher.

However, two separate acquisition agreements for Ninja Theory fell through. Microsoft will now begin consultation with employees regarding a proposed closure while exploring other options. Consultation with Arkane Studios remains ongoing and is expected to continue through the end of the year.

Xbox chief content officer Matt Booty outlined the changes in an internal memo, stating the reorganization aims to strengthen franchises by operating fewer business units and aligning groups that already work closely together. Microsoft previously announced that 3,200 roles would be impacted across the 2027 financial year, meaning over 1,000 positions remain to be announced as the restructuring continues.