Microsoft cut 268 jobs across its gaming division this week and moved several major studios and franchises to new homes, the latest step in what Xbox chief Asha Sharma has called the most significant restructure in Xbox history. The layoffs follow the thousands of cuts Microsoft began making in early 2024. Current and former employees say the repeated rounds have damaged morale.
Halo Studios absorbed much of the damage. Microsoft is laying off most of the team rather than placing it directly under Activision, keeping only a small group to support Halo Infinite and the recently released Halo: Combat Evolved. A source said the studio's next Halo game was years from release, so Microsoft ended it. Some employees waited hours to learn whether they had been affected, with the first word coming in a public Xbox blog post before individual notifications went out.
Reaction from former staff was mixed. Ron B, a former Halo Studios employee, wrote on LinkedIn that he felt mostly relief after a miserable year and a half. Josh Daniels, a former cinematic director there, noted he had been promoted and laid off in the same week. Shannon Loftis, who spent nearly 30 years at Microsoft and led World's Edge before retiring in 2022, criticized Sharma on Threads, saying Sharma had told the Wall Street Journal that clarity is kindness and then carried out a partial layoff.
The reshuffle extends well beyond Halo. World's Edge, the Age of Empires studio, is moving into Activision with some layoffs. Rare, the developer of Sea of Thieves, is also shifting under Activision. Turn 10 Studios and Playground Games, the Forza developers, are merging into one studio a year after Microsoft gutted Turn 10. Obsidian is leaving Xbox Game Studios for Bethesda Game Studios, where it will work on a new Fallout entry.
Analyst Mat Piscatella said these are not cuts a serious business makes. Loftis described Xbox as squandered, listing talent, intellectual property, time, money, gamers, community, goodwill, brand equity and stable services among what she said has been lost. The moves reduce management layers, offload smaller studios and concentrate on larger franchises. Employees believe The Coalition and inXile could face layoffs after Gears of War: E-Day and Clockwork Revolution ship, and Microsoft already began some Coalition cuts this week.
Game Pass remains unsettled. Microsoft has repeatedly adjusted the service, adding and removing Call of Duty, changing pricing and reversing cloud access decisions. Sources have described long-running tension between Xbox leadership and studios over putting games on the service, since it undercuts traditional sales. Xbox lost $300 million in Call of Duty sales after adding the franchise, prompting a reversal on new entries. Rumors point to an overhaul creating tiers with or without ads, debuting without day-one games, plus cloud bundles and a family plan.
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