Microsoft has enacted another wave of layoffs across its Xbox division, cutting roughly 3,200 staff members. While no studios have been shut down, five are divesting from Xbox, either going independent or being acquired. This follows over 9,000 layoffs in three years and multiple studio closures. Xbox boss Asha Sharma has implied a refocus on core franchises, aiming for a daily audience of over a billion people through Xbox services.
The Coalition
Founded in 2010, The Coalition took over the Gears Of War series in 2015. Its next project, prequel Gears Of War: E-Day, launches in October 2026. However, Gears Of War hasn't been a big seller since the Xbox 360 era, and E-Day is rumored to have an extremely high budget, unlikely to be recouped as an Xbox console exclusive. Last year's remaster of the original game sold poorly on PlayStation 5, increasing reliance on Xbox owner nostalgia.
Halo Studios
Formerly 343 Industries, Halo Studios has worked exclusively on Halo since 2007. The refresh begins with Halo: Campaign Evolved later this month, a remake of the original campaign (excluding multiplayer), releasing on PlayStation 5 with strong pre-order numbers. Multiple projects are in development, but Xbox may keep them exclusive to drive hardware sales. Recent layoffs may reallocate resources to Halo, potentially pulling other studios into support roles.
inXile Entertainment
Acquired in 2018, inXile has yet to release an Xbox-published game. That changes with Clockwork Revolution, an original action RPG scheduled for 2027. However, it will be an Xbox console exclusive, and inXile's games are not blockbuster hits. The studio may be leveraged for a new Fallout spin-off or support on Fallout 5, given its Wasteland series roots.
Obsidian Entertainment
Since its 2018 acquisition, Obsidian released The Outer Worlds (4 million sales), but The Outer Worlds 2 and Avowed (both 2025) were sales failures. Grounded 2's early access was more successful, but the studio lost about a quarter of its staff in recent layoffs. Obsidian has ruled out another Outer Worlds sequel and hinted at further Avowed games, but plans may change. The studio could be relegated to support work on Fallout 5.
Playground Games
Playground Games is now Microsoft's premier first-party studio, with Forza Horizon 6 boosting Xbox console sales. A PlayStation 5 port is expected later in 2026. The studio is also developing next year's Fable reboot, its first non-racing game. No staff losses have been reported in the current layoffs.
Rare
Rare has focused on Sea Of Thieves since 2018, with other projects like Everwild and a Banjo-Kazooie revival cancelled. The studio will likely remain focused on Sea Of Thieves, possibly developing a sequel.
Turn 10 Studios
Badly affected by last year's layoffs, losing half its staff, Turn 10 now serves as a support studio for Forza Horizon, effectively ending the Forza Motorsport series.
World's Edge
This small studio focuses on Age Of Empires and continues to pump out expansions without apparent impact from layoffs.
Mojang
Developer of Minecraft, a consistent money maker, Mojang reports directly to Sharma. It is working on Minecraft Dungeons 2 (September 2026) and mobile game Minecraft Blast in collaboration with King.
ZeniMax Media/Bethesda
Bethesda is shifting focus to The Elder Scrolls and Fallout, but new Quake, Doom, and Wolfenstein games are still planned. MachineGames is working on Wolfenstein 3 and possibly a new Quake. id Software has been hit hard by layoffs. ZeniMax Online Studios lost staff but will continue The Elder Scrolls Online. Arkane Lyon may leave Microsoft due to French labour laws, with its Blade game's fate uncertain.
Activision Blizzard King
The $75.4 billion acquisition has led to multiformat moves and constant layoffs. Activision will keep producing Call Of Duty, but day one Game Pass releases have stopped. Blizzard has no new games scheduled, only supporting Overwatch and Diablo 4. King's Candy Crush remains Microsoft's mobile foothold, but staff have been replaced by AI tools, foreshadowing potential changes across Xbox studios.
