Microsoft layoffs extend to Xbox as 268 employees lose jobs

Microsoft has laid off 268 employees across its Xbox division as the company presses ahead with a broader reorganisation of its gaming business, according to reporting by Bloomberg. The latest cuts come amid significant changes to studio structures, leadership responsibilities and game development operations across Microsoft's gaming portfolio.

The move follows a wider workforce reduction programme announced earlier this year and reflects Microsoft's efforts to improve the performance of its gaming division after years of margin pressure and slowing growth.

According to Bloomberg, Xbox Chief Content Officer Matt Booty informed employees on 22 September that Activision will take on a larger role in Microsoft's gaming ecosystem, including oversight of the next instalment of the Halo franchise.

"I am deeply grateful for what our colleagues have built, and I know how difficult today will be for those leaving and the teams around them," Booty said in a message to employees reported by Bloomberg.

Studio responsibilities are being reshaped

The latest restructuring extends beyond workforce reductions and includes significant changes to how Microsoft's gaming studios are managed.

Under the revised structure:

• Activision will lead development of the next Halo title.
• Activision will also oversee Rare and World's Edge, the studio behind the Age of Empires franchise.
• Halo Studios will continue supporting existing Halo games but will also be affected by layoffs.
• Bethesda will assume responsibility for Obsidian Entertainment.
• Obsidian will continue work on Grounded while also developing a new Fallout project.

The changes mark one of the most substantial reorganisations of Microsoft's gaming studios since its acquisition-led expansion strategy accelerated in recent years.

Layoffs follow wider Xbox reset

The latest reductions come after Microsoft announced broader workforce cuts across Xbox in July.

According to earlier reporting by The Information, Xbox leadership had been developing a spending plan aimed at restoring growth and improving financial performance. The plan was approved by Microsoft CEO Satya Nadella and Chief Financial Officer Amy Hood, although details remained subject to change.

At the centre of the restructuring effort is Asha Sharma, CEO of Xbox, who has publicly acknowledged the challenges facing the business.

According to Bloomberg, Sharma told employees:

"Our business today is not healthy." She added: "We must reset Xbox."

The remarks followed internal concerns around declining profitability and revenue performance across the gaming business.

Profitability pressures intensify

Microsoft's gaming division has faced mounting pressure to improve financial returns despite major investments in content and acquisitions.

Key figures cited in reports include:

• Xbox profit margins reportedly falling to 3%.
• Revenue declining over a five-year period when excluding the contribution from Activision Blizzard.
• A planned reduction of approximately 3,200 positions, representing around 20% of Xbox's workforce.
• The latest 268 job cuts forming part of the ongoing restructuring programme.

According to Bloomberg, Booty indicated that Xbox has already completed roughly three-quarters of its planned workforce reductions.

Halo remains central to Microsoft's gaming strategy

Despite the organisational changes, Halo continues to occupy a pivotal position within Microsoft's gaming portfolio.

Originally developed by Bungie, Halo launched alongside the first Xbox console in 2001 and became one of the platform's defining franchises. Following Bungie's departure after Halo 3, Microsoft established 343 Industries, later renamed Halo Studios, to continue development of the series.

While Halo has remained commercially important, recent entries have faced criticism over development complexity, production costs and inconsistent reception among parts of the franchise's fan base.

Microsoft's decision to place future Halo development under Activision's leadership signals a new chapter for one of gaming's most recognisable properties.

A pivotal period for Microsoft's gaming business

The latest layoffs highlight the scale of change underway across Microsoft's gaming operations. Beyond workforce reductions, the company is redesigning studio structures, redistributing development responsibilities and reassessing how its largest gaming assets are managed.

As Xbox moves through its restructuring programme, leadership faces the challenge of improving profitability while maintaining momentum across major franchises and integrating some of the industry's largest studio acquisitions.