Microsoft is cutting 268 more jobs in its games business and giving the next Halo to the publisher that makes Call of Duty.
Matt Booty, Xbox's chief content officer, set both out in a note to staff on Tuesday morning, published on Xbox Wire under the title "Continuing Our Reset." The roles go from Halo Studios, from other first-party studios, and from Xbox Game Studios management and central functions. Activision, which Microsoft bought for $69bn in a deal that closed in 2023, will develop the next Halo game with what Booty described as "a new, purpose-built team that is separate from ongoing development and plans for Call of Duty." Halo Studios keeps a small group to support the games already shipped and the community around them.
The number is not the story. Microsoft does not disclose headcount for Xbox, but Bloomberg reported in July that the 3,200 roles then being cut amounted to about 20 per cent of the division, which puts it near 16,000 before this year began. Against that, 268 is a rounding error. The story is the shape of what is left.
Fewer places where a game gets made
Four studios changed owners inside Microsoft on Tuesday. Activision takes on Rare, which makes Sea of Thieves, and World's Edge, which makes Age of Empires, alongside Halo. Obsidian, which is finishing Grounded and starting a new Fallout project, moves under Bethesda. Microsoft Casual Games moves under King, the Candy Crush business that arrived with Activision. Turn 10 and Playground Games, the two studios that between them make Forza and Fable, merge into one.
Booty's stated reason was to "strengthen our franchises and games by operating fewer business units," to align groups that already work closely together, and to concentrate publishing expertise. Read that without the corporate register and it says something specific: Microsoft has decided it owns too many separate places where a game is greenlit, budgeted and marketed, and is reducing them to a handful of publishing spines — Activision, Bethesda, King — with studios hanging off each.
That is a familiar move in any conglomerate that has bought its way to scale and then discovered it is paying for the overhead of each acquisition. It is also the move most likely to show up in a margin line before it shows up in a game.
Ninja Theory is the harder paragraph
The bleakest item in Booty's note concerns Ninja Theory, the Cambridge studio behind Hellblade, which Microsoft put up for sale in July as part of the divestiture programme. "Two separate agreements fell through," he wrote. "We will now begin consultation with employees on a proposed closure while continuing to explore other paths forward." Consultation at Arkane, the Dishonored and Deathloop studio, runs through the end of the year.
Two of the five studios Microsoft set out to divest did land. Compulsion Games and Double Fine were returned to independence with their intellectual property and some funding. Undead Labs was also transitioned out, and State of Decay 3 will still launch into Game Pass on day one. But a divestiture only counts as a divestiture if someone signs. Twice, for Ninja Theory, nobody did — which is information about the market for mid-sized studios, not only about Microsoft.
The arithmetic of a reset
On 6 July, Bloomberg reported that Xbox would cut 3,200 roles, roughly 20 per cent of the division, over the following year, with 1,600 going immediately. The note announcing it came from Asha Sharma, who replaced Phil Spencer as chief executive of Microsoft Gaming in February. "Our business today is not healthy," she wrote. "We must reset Xbox." She cited an annual revenue decline of nearly $500m against roughly $20bn invested in gaming over five years, and operating margins three to ten times lower than comparable platform businesses.
Booty's line on Tuesday was that the actions completed since July, including the divestitures, "bring us roughly three-quarters of the way through previously announced restructuring." Microsoft does not publish a running total, so the only way to a number is arithmetic: three-quarters of 3,200 is about 2,400, which leaves around 800 roles still to go before the programme closes. Whether they arrive as another Tuesday morning note or as studios that quietly do not get their next budget is not something the company has said.
The financial pressure is real and measurable. In the quarter to 30 June, Xbox revenue was $4.98bn, down 10 per cent year on year; hardware fell 13 per cent and content and services fell 10 per cent. Full-year gaming revenue was about $21.8bn, down 7 per cent. Microsoft's total revenue for the quarter was roughly $90bn and rising on cloud and AI. Gaming is the part of the company that is shrinking while everything around it grows, and it is being restructured accordingly.
Where this sits in the year
GeekWire, which tracks Microsoft's Washington state filings, reported that Tuesday's reductions across the company totalled roughly 600 globally, about 300 of them in Washington, of which the 268 are the gaming share. That follows July's company-wide cut of about 4,800 roles, some 2 per cent of the workforce. In August Microsoft hired 850 university graduates and ran 1,300 summer interns. The company is not shrinking. It is reallocating.
The industry number is larger and harder to argue with. Layoffs.fyi counted 128,536 technology employees cut at 299 companies between 1 January and 10 September this year — already more than the whole of 2025. Challenger, Gray & Christmas, using a different method, counted 155,126 US technology job cuts through August, up 52 per cent on the same period last year. Apple's two rounds in August and September, small as they were, fell on the same kind of work: the content teams rather than the engineers.
What distinguishes Xbox is that the cutting comes with a rewritten org chart rather than a headcount target alone. Microsoft has not said it will make fewer games. It has said it will make them in fewer buildings, under fewer publishers, with the biggest franchise it owns handed to the team that already knows how to ship an annual blockbuster. The test will not be the next quarter's margin. It will be whether the next Halo, made by people who have never made one, arrives at all.
The 268 figure, the studio reorganisation, the Ninja Theory consultation and the "roughly three-quarters" characterisation are from Matt Booty's note to Team Xbox, published on Xbox Wire as "Continuing Our Reset" on 22 September 2026, and as reported the same day by The Washington Post, Video Games Chronicle, GeekWire and Deadline. GeekWire is the source for the wider Washington state and global totals for Tuesday's cuts and for Microsoft's July reductions. The July restructuring — 3,200 roles, about 20 percent of the division, 1,600 of them immediate, and the divestiture of five studios — is from Bloomberg's report of 6 July 2026; Asha Sharma's "our business today is not healthy" note and the revenue and margin figures she cited are from the same report. Xbox segment revenue is from Microsoft's fourth-quarter fiscal 2026 results of 29 July 2026. The 2026 layoff totals are from Layoffs.fyi and from Challenger, Gray & Christmas as reported in September. The arithmetic converting "three-quarters" into a headcount is our own, and Microsoft has not published a running total.
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