Xbox Reportedly Prepares Hundreds More Layoffs as Studio Consolidation Looms

Microsoft is reportedly preparing another major round of Xbox layoffs this week, with hundreds of positions expected to be eliminated as the company also moves to consolidate several game studios. The new information comes during the restructuring Xbox announced in July, when CEO Asha Sharma confirmed plans to eliminate approximately 3,200 roles throughout fiscal 2027, including around 1,600 immediate cuts. Unless Microsoft announces otherwise, the incoming reductions should therefore not automatically be treated as hundreds of jobs beyond that previously disclosed 3,200 total.

According to the latest report on Xbox's restructuring, Microsoft plans to eliminate hundreds of positions this week while consolidating several development studios. The report does not identify which teams are being combined or provide a final number of affected employees. It does, however, reinforce what Microsoft already told employees in July, when Sharma said the restructuring would continue throughout FY27 rather than being completed in a single wave. The company's official Xbox reset announcement also said reductions would extend across Activision, Bethesda and ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios as investment shifts toward higher priority projects.

Blizzard has emerged separately as one of the studios expected to be affected. During the September 18 episode of 8 4 Play, Bloomberg journalist Jason Schreier directly addressed the possibility of additional cuts at the developer.

"The Blizzard layoffs are coming and imminent."
— Quote by: Jason Schreier.

Microsoft and Blizzard have not yet announced the number of positions involved or identified which development teams could be affected, making the scope of those cuts unclear despite the stronger indication that another reduction is approaching.

Halo is surrounded by a more complicated mixture of reporting and insider claims. Windows Central's Jez Corden said players would learn more about the future of Halo "within a day," while NateTheHate suggested that reactions to the franchise news would vary and separately acknowledged layoffs as part of the surrounding discussion. Additional claims now suggest Halo could move under the Activision Blizzard King organization as Microsoft reorganizes its internal studios, but Microsoft has not confirmed that Halo Studios is being absorbed, renamed, closed, or stripped of responsibility for the franchise. Until an official announcement arrives, those details remain significantly less certain than the broader Xbox restructuring itself.

The possibility of Activision becoming more deeply involved with Halo would not appear from nowhere. Halo Campaign Evolved reportedly used 15 external studios while Microsoft explored Activision support for future Halo development. Sledgehammer Games was also reportedly involved in an early Halo multiplayer prototype during 2026, although that specific project was not approved. Expanding Activision's role could therefore represent an extension of an existing production strategy rather than a complete handover, but there is currently no official confirmation of how responsibilities would be divided.

The wider restructuring follows an unusually severe summer for Xbox development teams. Microsoft's July plan called for approximately 3,200 role reductions throughout FY27, while Compulsion Games and Double Fine Productions returned to independent ownership and Ninja Theory and Undead Labs moved toward new owners. Arkane Lyon also entered a consultation process over its future. The cuts reached teams including ZeniMax Online Studios and id Software, with former developers warning that the reductions would affect production capacity. The Elder Scrolls Online developers warned that future content would slow significantly and former id Software staff raised concerns about the effect on id Tech.

Microsoft said in July that none of its publicly announced first party projects were being cancelled as part of that restructuring. There is currently no indication that the company has reversed that commitment, but the reported studio consolidation raises new questions about where major franchises will be developed and how many internal teams Xbox intends to maintain. The Information says Sharma is attempting to improve gaming margins while concentrating investment around Microsoft's largest franchises, including properties such as The Elder Scrolls and Fallout, which aligns with the broader strategy Xbox described when announcing its reset.

The layoffs themselves are unfortunately not a surprise. Microsoft explicitly warned in July that the Xbox restructuring would continue throughout FY27, meaning another wave was already built into the company's public plan. What matters now is how deeply the studio consolidation changes the structure behind major franchises.

Halo is the clearest example. Microsoft already experimented with spreading development across Halo Studios, external partners, and potentially Activision teams. Moving more responsibility toward Activision could give Halo access to a huge pool of experienced shooter developers, but that is very different from proving that Halo Studios itself is being replaced. Those 2 possibilities should not be treated as interchangeable until Microsoft explains the new structure.

Blizzard is more immediate. Schreier's comments point directly toward layoffs, even as the studio is building a long term slate of major projects. The uncomfortable pattern across the Xbox reset is that commercial importance no longer appears to guarantee protection from workforce reductions. Microsoft is attempting to make its gaming organization smaller, flatter, and more concentrated around major franchises, and this week's reported cuts could show just how far that consolidation is going.

Would moving Halo more closely under Activision strengthen the franchise through additional shooter expertise, or should Halo Studios remain fully responsible for its future?