Microsoft's September 22 Xbox Layoffs Hit Halo Studios and XGS Management
Microsoft made the announcement in a memo to all Xbox employees, posted publicly on Xbox Wire under the title "Continuing Our Reset." The memo is signed by Matt Booty, Xbox's executive vice president and chief content officer. Xbox has announced it is laying off 268 roles across its first-party studios, XGS management, and central functions layer. XGS means Xbox Game Studios. The Washington Post, Shacknews, Game Informer and GeekWire all reported the same figure and the same groups, so the Xbox number is not in doubt.
Halo Studios is the only studio Microsoft named. Formerly 343 Industries, it is the Redmond-area developer that has made the Halo games for Microsoft. Game Informer reports that Halo Studios in particular has been significantly impacted. The memo does not say how the 268 roles split between Halo Studios, the other first-party teams and the management layer.
Booty presented the cuts as the next step in a plan staff already knew about. The memo says the actions taken since July, including the studio divestitures, bring Xbox "roughly three-quarters of the way through previously announced restructuring." That figure is Microsoft's own estimate, and it counts studios sold off or spun out alongside layoffs. So "75% complete" does not mean three-quarters of the planned job cuts have happened. MyNorthwest used the figure in that looser way.
The Washington Count Reaches Beyond Xbox Into Cloud, AI and Research
The Washington number is harder to pin down than the Xbox one. MyNorthwest, citing The Seattle Times, reported about 300 Washington jobs out of roughly 450 companywide, with most of the cuts in Xbox. GeekWire, citing Microsoft directly, gives a larger total and a wider spread. According to GeekWire, Microsoft is making hundreds of additional layoffs on Tuesday morning, continuing the Xbox restructuring announced in July but also extending beyond it with job cuts in areas including cloud, AI, marketing and research. It adds that the company said the total reductions number fewer than 600 globally. About 300 of them are in Washington state, according to the company.
Both outlets agree on roughly 300 Washington jobs and 268 Xbox studio roles. They differ on the global total: about 450 in The Seattle Times' account versus "fewer than 600" in Microsoft's statement to GeekWire. Microsoft's own wording is a ceiling, not an exact count, so neither figure has been officially reconciled. Either way, several hundred cuts fell outside Xbox Game Studios. Microsoft told GeekWire the non-gaming reductions were part of the normal course of business, as teams reevaluated their needs, with no single cause behind the layoffs.
Microsoft's public statements also don't say how many of the 268 Xbox roles are in Washington. Halo Studios is local, but the "other first-party studios" are spread around the world. More detail should come from the state. More details on Microsoft's Washington state cuts, including the types of roles affected, will likely emerge later through a WARN notice filed with state employment officials. A WARN notice is the advance layoff filing that large employers submit under worker-notification rules. Microsoft's July notice was the document that set out that round's Washington job count and effective date.
Activision Takes Over Halo as Xbox Merges Studios Under Fewer Publishers
The most consequential part of the memo for players is the reorganization. Booty wrote that the goal is to strengthen franchises by running fewer business units, grouping teams that already work closely together and concentrating publishing expertise. Taken together, the changes fold most of Xbox's first-party studios into three big publishing groups: Activision, Bethesda and King.
The planned changes, as announced:
| Group | What it gains | Stated purpose |
|---|---|---|
| Activision | World's Edge (Age of Empires), Rare (Sea of Thieves), and development of the next Halo through a new team | A purpose-built Halo team separate from Call of Duty development |
| Bethesda | Obsidian | Obsidian continues current projects, including Grounded, plus a new Fallout project with Bethesda Game Studios |
| King | Microsoft Casual Games | Combines Microsoft's two casual-game and live-operations groups |
| Playground Games + Turn 10 | Merged into one studio | Focus on the Forza and Fable franchises |
The Halo move is the headline. Activision will expand its remit to World's Edge (known for Age of Empires) and Rare (known for Sea of Thieves), and a new team will be created within Activision to develop the next Halo title. The memo says this team is separate from ongoing Call of Duty development and plans. That matters to anyone worried the franchise would be handed to studios already stretched by Call of Duty's yearly schedule. Halo Studios is not closing outright. A small team there will keep supporting the Halo community and the games already on sale.
The Playground–Turn 10 merger makes an existing arrangement official. The memo says the two studios have been creative and franchise partners for over a decade, and today's changes will formally move their work into one team. The Washington Post described the whole package as a sweeping reorganization of its studios, and Polygon, as cited by Tech Insider, focused on four franchises changing hands or reporting lines in one memo: Halo, Fallout, Forza and Fable.
These are announced plans. The memo does not give dates for when each change takes effect, or when players might see the new Halo team's first work.
Ninja Theory and Arkane Are the Unfinished Part of the Xbox Reset
The memo also updated the studio divestitures that began in July. Microsoft said Compulsion Games and Double Fine returned to their own management in August, keeping their IP, back catalogs and runway funding. Undead Labs has now left on similar terms. With a new publisher, it will still release State of Decay 3 on Game Pass on launch day.
Ninja Theory, the Hellblade developer, did not get a similar exit. Microsoft wrote: Unfortunately, two separate agreements for Ninja Theory fell through. We will now begin consultation with employees on a proposed closure while continuing to explore other paths forward. The studio has not closed. Employee consultation has only just started, and Microsoft says it is still looking for alternatives. But a proposed closure following two failed sale attempts is a bad sign for the studio.
Arkane is still undecided. Consultation with Arkane remains underway and is expected to continue through the end of the year. GeekWire notes that the French Arkane studio is the last of five studios Microsoft moved to divest in July. The memo says nothing about which way that consultation is likely to go.
How September's 268 Cuts Fit the 3,200-Role Plan From July
The July background explains the September round. On July 6, 2026, Microsoft announced about 4,800 job cuts worldwide, roughly 2% of its workforce, Axios reported. A Washington state filing that day listed 605 permanent job eliminations, 493 of them in Redmond, effective September 4. Those numbers belong to July and should not be added to Tuesday's round.
Xbox took a large share of the July cuts. Xbox CEO Asha Sharma called it the division's biggest restructuring ever, and in a memo she shared publicly she wrote, "Our business today is not healthy." Axios reported that the division would cut about 1,600 jobs right away and another 1,600 over the fiscal year. Citing GeekWire, it put the total at about 3,200 roles, roughly 20% of Xbox's workforce. Microsoft's fiscal year ended June 30, so "over the fiscal year" means by mid-2027.
In July, Microsoft chief people officer Amy Coleman also addressed AI directly. She wrote that the roles eliminated were "not being replaced by AI," while acknowledging that "AI is changing how work gets done." Axios reported that her memo warned more changes were coming and that other parts of the business would need to make similar changes. The non-Xbox cuts in cloud, AI, marketing and research that GeekWire reported on Tuesday match that warning, though Microsoft calls them routine rather than part of a coordinated program.
Game Informer puts September plainly: after the July round of 1,600 roles, Xbox said more cuts would follow, and today, those cuts have come. The 268 figure is well short of the roughly 1,600 still planned for the rest of the fiscal year. Microsoft closes that gap in its "three-quarters" estimate by counting the studio divestitures, whose staff left Microsoft's payroll without being laid off. Shacknews also says the layoffs are not as large as the 3,200 announced in July, but expects the structural changes to reach far across the portfolio.
What the Xbox Restructuring Means for Game Pass Players, Halo Fans and Local Workers
Most players don't need to do anything. What changes is who makes the games they follow. Nothing in the memo changes Game Pass subscriptions, Xbox hardware or the Windows versions of existing first-party games. The practical questions are about specific franchises, and Microsoft has answered some of them.
Halo players on Xbox and PC should expect current games to keep being supported by a smaller Halo Studios team, with new mainline work now at Activision. Fallout, Forza, Fable and Grounded fans get continuity statements rather than cancellations. Ninja Theory is the franchise-level risk. If you're following Hellblade, the next update will be the outcome of the closure consultation.
For readers in the Puget Sound tech workforce, the key document is the upcoming WARN filing. It should show which Washington roles and locations are affected and how Tuesday's cuts break down between Xbox and the rest of Microsoft.
- Microsoft cut 268 roles across Halo Studios, other first-party studios and Xbox Game Studios management and central functions on September 22, 2026.
- About 300 of Tuesday's companywide cuts are in Washington. The global total is roughly 450 per The Seattle Times, or "fewer than 600" per Microsoft's statement to GeekWire, and includes cloud, AI, marketing and research roles outside Xbox.
- The next Halo game is moving to a new, dedicated team at Activision, and a small Halo Studios team will keep supporting current Halo games.
- Obsidian moves under Bethesda, World's Edge and Rare move under Activision, Microsoft Casual Games joins King, and Playground Games and Turn 10 merge to focus on Forza and Fable.
- State of Decay 3 will still launch on Game Pass on day one under Undead Labs' new publisher, while Ninja Theory faces a proposed closure and Arkane's consultation runs through the end of 2026.
- Microsoft's "roughly three-quarters complete" estimate counts studio divestitures as well as layoffs, so more Xbox job cuts before the fiscal year ends would fit the original 3,200-role plan.
Microsoft's own progress figure shows the Xbox reset is not finished. The company has also scheduled an all-Xbox town hall for October 6, where Booty says staff will review progress and look ahead to what he calls one of the strongest game lineups in Xbox history. The next concrete developments are the Washington WARN notice, the result of the Ninja Theory consultation and Arkane's fate by year's end. Each will show how much of the remaining quarter of the plan comes from further layoffs and how much from studios leaving Microsoft.