Call of Duty's makers now lead Halo development as Microsoft cuts 268 more staff

Microsoft has handed control of Halo's next game to Activision, the studio behind Call of Duty, marking a significant shift for a franchise that has long resisted the influence of its rival shooter. The change came alongside a new round of layoffs affecting 268 people across Halo Studios, other first-party developers, and Xbox's central management.

Halo Studios, formerly known as 343 Industries, has been demoted to a support studio focused on maintaining existing Halo games and supporting the community. Activision will lead development of the next mainline title with what Xbox Chief Content Officer Matt Booty described as "a new, purpose-built team that is separate from ongoing development and plans for Call of Duty."

The decision underscores the scale of Microsoft's restructuring efforts. In July, the company announced plans to cut 3,200 staff across its fiscal year 2027. With 1,600 cuts in July and 268 more now, 1,332 layoffs remain planned. Booty confirmed the latest changes bring the company "roughly three-quarters of the way through" its restructuring.

Halo Studios was established in 2007 after Bungie, the franchise's original creators, regained independence from Microsoft. Over nearly two decades, the studio developed Halo 4, Halo 5: Guardians, and Halo Infinite, alongside remasters and spin-offs including The Master Chief Collection. The studio was renamed in 2024 to signal a fresh start, with development shifting from the proprietary Slipspace Engine to Unreal Engine 5. Halo: Campaign Evolved launched recently but did not achieve significant commercial traction.

The transfer of Halo to Activision represents a merger of two franchises that have competed fiercely in the shooter market for nearly two decades. Historically, Call of Duty focuses on aim-down-sights mechanics, multiplayer progression, and small-scale infantry combat, while Halo emphasizes sandbox design with vehicles, longer time-to-kill values, and on-map gadgets. Booty's emphasis on keeping the teams separate suggests awareness of player concerns about Call of Duty's influence on Halo's identity.

Xbox CEO Asha Sharma, who took the role this year after Phil Spencer's departure, said the Xbox business was in "an unhealthy place" and required drastic changes. She cited Game Pass failing to deliver expected returns, a shift away from exclusives that weakened core business, and what she called "the most severe hardware crisis in its history" stemming from component shortages. Despite Microsoft's enormous profitability, with $90 billion in revenue and nearly $36 billion in net profit for its latest quarter, the company remains under pressure from shareholders demanding continued growth.

Messages of support for affected employees appeared quickly on LinkedIn. Former Halo Studios art director Glenn Israel, who left in October 2025, wrote that employees "are not alone" and offered resources to those affected. Bill Rosas, a former senior software development engineer at Halo Studios, wrote simply: "good luck today, Halo friends."

The consolidation extends beyond Halo. Turn 10 and Playground Games, the studios behind Forza Motorsport and Forza Horizon respectively, are merging into a single team focused on both Forza and the upcoming Fable game launching in 2027. Playground Games recently released Forza Horizon 6.