Xbox layoffs: Activision gets Halo, Ninja Theory may close
Xbox layoffs hit 268 more roles as Activision takes Halo, Ninja Theory faces a proposed closure and Satya Nadella backs the cuts. What changes for each studio.
Source-based. Written from the documents, reporting and reviews linked in the text. Nothing here was tested hands-on by The Ruling Desk. How we work
The latest round of Xbox layoffs, announced on September 22, 2026, cuts 268 more roles, most visibly at Halo Studios, and moves the next Halo game to a new team inside Activision. Microsoft also proposed closing Ninja Theory, the Hellblade studio, after two sale deals fell through, and State of Decay 3 developer Undead Labs left Xbox and then laid off staff. Three days later, Microsoft CEO Satya Nadella called the "streamlining" under Xbox chief Asha Sharma "great to see."
Key takeaways
- Xbox content chief Matt Booty's memo eliminates 268 roles across Halo Studios, other first-party studios and central teams. Microsoft told GeekWire its wider cuts that day total fewer than 600 globally.
- A new, purpose-built Activision team, separate from Call of Duty, will develop the next Halo. A small Halo Studios team stays to support the Halo games already on sale, and Rare and World's Edge (Age of Empires) now report to Activision too.
- Ninja Theory is not closed yet. Microsoft is starting a consultation with employees on a proposed closure and says it is still exploring other paths.
- Obsidian moves under Bethesda, and Arkane's Lyon studio stays in a consultation expected to run through the end of 2026. Undead Labs, now independent, said goodbye to "a significant number" of colleagues but says State of Decay 3 still targets 2027.
- On September 25, 2026, Microsoft CEO Satya Nadella publicly backed the cuts, saying on a podcast that the "streamlining" Sharma is doing is "great to see." Kotaku counts more than 1,600 Xbox layoffs so far this year.
What the new Xbox layoffs change
Matt Booty, Xbox's chief content officer, sent the memo to staff and published it on Xbox Wire as "Continuing Our Reset". It eliminates 268 roles "across Halo Studios, other first-party studios, and the XGS management and central functions layer," and reorganizes the studios into fewer business units.
The 268 figure covers Xbox's game studios only. GeekWire reports that Microsoft's layoffs that morning also reached cloud, AI, marketing and research teams, fewer than 600 people globally, with about 300 of them in Washington state, according to the company.
Here is where each studio lands, according to the memo:
| Studio | What changes |
|---|---|
| Halo Studios | The next Halo goes to a new Activision team; a small team stays for the current games |
| Rare, World's Edge | Move under Activision |
| Obsidian | Moves under Bethesda, keeps its current projects |
| Microsoft Casual Games | Joins King |
| Playground, Turn 10 | Merge into one studio for Forza and Fable |
| Ninja Theory | Proposed closure, consultation with employees starting |
| Arkane (Lyon) | Consultation still underway, expected through the end of 2026 |
| Undead Labs | Now independent, on terms similar to Compulsion and Double Fine |
Halo Studios: Activision builds the next Halo
The memo says Activision "will also be developing the next Halo title, led by a new, purpose-built team that is separate from ongoing development and plans for Call of Duty." So this is not the Call of Duty studios taking over Master Chief; it's a new team under the Activision banner.
Halo Studios, the Redmond team formerly called 343 Industries, doesn't close. The memo says a small team "will continue supporting the Halo community and games in-market," and GeekWire's report adds that the team stays in Redmond and also covers Halo esports. Microsoft hasn't said how many of the 268 roles were at Halo Studios, though Game File's Stephen Totilo reports that most of the cuts landed there. The studio's latest release was Halo: Campaign Evolved, a remake of Halo: Combat Evolved's campaign that came out on July 28, 2026, on PS5 among other platforms.
Activision's side of the story so far is one statement. Its president, Rob Kostich, said in remarks Game File added to its report: "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." Neither company gave a date, platform list or name for the next Halo game.
Ninja Theory: a proposed closure after two failed sales
In July, Xbox said Ninja Theory had "entered terms to join new ownership with funding to complete and grow Senua," the heroine of the Hellblade games. That deal, and a second one, collapsed. In Booty's words: "two separate agreements for Ninja Theory fell through."
A Ninja Theory closure is now a proposal, not a decision. Microsoft "will now begin consultation with employees on a proposed closure while continuing to explore other paths forward." Microsoft hasn't said what happens to the Hellblade series or to the Senua project the July memo mentioned if the closure goes ahead.
Obsidian, Arkane Lyon and the rest of the studio moves
Obsidian joins Bethesda and, per the memo, keeps working on Grounded and on "the new Fallout project made in collaboration with Bethesda Game Studios." For Fallout fans, that puts the studio behind Fallout: New Vegas back under the same roof as the series' owner.
Arkane is still in limbo. The July memo said Arkane's management in France had begun a required consultation with its Works Council "to review potential strategic options," and Engadget notes the studio in question is Arkane Lyon. Booty now says that consultation "is expected to continue through the end of the year." Neither memo mentions Marvel's Blade, the game Arkane Lyon announced in 2023.
Rare, the Sea of Thieves studio, and World's Edge, the Age of Empires team, now report to Activision, the same label that is building the next Halo. As Shacknews points out, World's Edge's latest release was Age of Mythology: Retold in September 2024, and Rare lost its Everwild project in the July 2025 round of Xbox layoffs.
Undead Labs goes independent, then cuts staff
Undead Labs announced on its State of Decay site that it has "completed its separation from XBOX" and now runs as an independent, employee-owned studio, after Microsoft bought it in 2018. The studio says State of Decay 3 is in alpha, still aims for a closed beta before the end of 2026, and remains targeted for 2027 on Xbox, Game Pass, PC and PlayStation. Its August playtest update names PlayStation 5 specifically. Booty's memo adds that a new publisher, which nobody has named, will release it day one on Game Pass.
The same day, the studio posted on LinkedIn that "today we are also saying goodbye to a significant number of our colleagues," as Kotaku reported. Undead Labs hasn't given a number. Kotaku cites one unnamed source saying up to 40 developers were affected, which we couldn't confirm. Studio head Philip Holt told IGN, via Kotaku, that "these changes will not impact the game's launch."
Why Xbox is cutting again
The reset began with a July 6 memo from Asha Sharma, who leads Xbox, titled "Resetting XBOX". She announced about 3,200 job cuts over Microsoft's fiscal 2027, about 1,600 of them that day, and four studios leaving Xbox (Compulsion, Double Fine, Ninja Theory and Undead Labs), with Arkane's French studio under review as a fifth.
Her reason was money. "Our business today is not healthy," she wrote, saying Xbox operates "at margins that are 3-10x lower than comparable platform and publishing businesses." Booty's new memo says the actions since July, studio sales included, bring Xbox "roughly three-quarters of the way through" that plan.
Microsoft's CEO backs the Xbox layoffs
The cuts have support at the very top. On the Sources podcast with Alex Heath, published September 25, 2026, Microsoft CEO Satya Nadella said: "There's some amount of streamlining the team is doing, and Asha is doing, which is great to see." He added that Microsoft still has "to invent the right sustainable business model that allows us to deliver gaming to more and more people," on PC and Xbox.
He was upbeat about the games themselves. "If I look at the studios, the IP portfolio we have, and our ability to then take that and produce great games going forward, I feel fantastic," Nadella said, adding that Sharma and her team "have said that Xbox is going to get growth this next fiscal year."
Kotaku, which wrote up the remarks, counts more than 1,600 Xbox employees cut so far this year, with plans for another 1,600 before Microsoft's fiscal year ends in June 2027. That tracks with the roughly 3,200 cuts Sharma announced in July. Kotaku's Zack Zwiezen also criticized Nadella for offering no word of sympathy for the people who lost their jobs.
What it means for Halo, Hellblade and State of Decay 3 players
As of September 23, 2026, here's what each company has said:
| Series | Who makes it now | What's confirmed |
|---|---|---|
| Halo | A new Activision team; a small Halo Studios team supports current games | No title, date or platforms for the next game |
| Hellblade | Ninja Theory, under a proposed closure | Nothing about the series' future |
| State of Decay 3 | Undead Labs, independent, with an unnamed publisher | In alpha, closed beta planned before the end of 2026, 2027 target, day one on Game Pass |
| Fallout, Grounded | Obsidian, now under Bethesda | Current projects continue |
If you play Halo today, the memo promises continued support for the games already out. If you're waiting on State of Decay 3, the studio's own dates haven't moved. Hellblade fans have the least to go on. More of our video games coverage follows these studios.
What happens next
- October 6: Booty says Xbox holds an all-staff town hall.
- The coming weeks: the Ninja Theory consultation starts. Its outcome and timing aren't public.
- By the end of 2026: the Arkane Lyon consultation is expected to end, and State of Decay 3's closed beta is due.
- By June 30, 2027: the end of Microsoft's fiscal 2027, the window Sharma set for the rest of the roughly 3,200 cuts.
- 2027: State of Decay 3's target launch window.
Bottom line
This round of Xbox layoffs is smaller than July's, but it redraws the map. Halo's next game belongs to a new Activision team, Obsidian joins Bethesda, and Undead Labs is on its own with State of Decay 3 still on track by its own account. Ninja Theory's closure is a proposal under consultation, not a final call, so watch for news on Hellblade once that process ends. And with Satya Nadella calling the streamlining "great to see," the rest of the plan appears to have Microsoft's full backing.
FAQ
Is Ninja Theory closing?
Not yet. Microsoft has proposed closing it after two sale agreements fell through, and it's starting a consultation with employees while it keeps looking at other options. No final decision or date has been announced.
Who is making the next Halo game?
A new team at Activision that Microsoft says is separate from Call of Duty. A small group at Halo Studios keeps supporting the Halo games already on sale. There's no release date or platform list yet.
Is State of Decay 3 still coming to Xbox and Game Pass?
Yes, according to Undead Labs and Microsoft. The studio says the game targets 2027 on Xbox, Game Pass, PC and PlayStation, and Booty's memo says it launches day one on Game Pass under a new publisher.
How many Xbox jobs have been cut in 2026?
Xbox planned about 3,200 cuts over its fiscal 2027, starting with about 1,600 on July 6, and cut 268 more roles on September 22. Microsoft says it's now roughly three-quarters of the way through the plan, but it hasn't published a running total. Kotaku counts more than 1,600 Xbox layoffs so far this year, with about 1,600 more planned before the fiscal year ends in June 2027.