Xbox is undergoing a major restructuring, with leadership changes, studio consolidation, cancelled projects and a renewed focus on its biggest franchises. This overview covers the confirmed developments available as of 24 September 2026.
The latest announcement came on 22 September, when chief content officer Matt Booty confirmed 268 further job cuts across Halo Studios, Xbox Game Studios and other first-party teams. Microsoft had previously outlined 3,200 planned reductions by July 2027. Around 1,900 positions have now been affected: approximately 1,600 in July and another 268 in September, leaving roughly 1,400 potential cuts still ahead.
The changes follow a leadership transition in February, when Phil Spencer and Sarah Bond left Microsoft. New chief executive Asha Sharma and Booty have attempted to rebuild confidence by reducing Xbox Game Pass pricing after the unpopular 2025 increases and reaffirming the next-generation Project Helix. The company has blamed weak revenue, rising hardware costs and pandemic-era expansion for the reset.
Microsoft’s summer showcase on 7 June presented several games from studios that would soon face restructuring. Three days later, reports emerged that significant layoffs were being prepared. Sharma and Booty subsequently published a plan for a 100-day reset; on 22 September, that process was 78 days underway.
Obsidian moves under Bethesda
Bethesda Game Studios head Jill Braff said the change is mainly a reporting restructure and that Obsidian’s creative identity will remain intact. Obsidian will continue its current projects, including Grounded, and will collaborate with Bethesda on a new Fallout project.
Obsidian is known for The Outer Worlds, Fallout: New Vegas, Pentiment, South Park: The Stick of Truth and the Pillars of Eternity series. The new arrangement may preserve the studio’s independence, although its future freedom to experiment is less certain.
World’s Edge loses its next project
World’s Edge, the team behind Age of Empires, has moved under Activision. Former creative director Adam Isgreen said roles for nearly half the studio were eliminated, including his own position. Engineer Andrew Martz also said the studio’s next project had been cancelled.
Martz said he was among those laid off after joining World’s Edge in February 2026, having previously lost another Xbox job in May.
Activision takes on Halo and Rare
Activision will develop the next Halo game through a new team operating separately from Call of Duty. Remaining staff at Halo Studios will continue supporting existing games.
Rare has also moved beneath Activision. The studio created Donkey Kong Country, GoldenEye 007 and Banjo-Kazooie before Microsoft acquired it in 2002. Its latest release is the 2018 live-service pirate game Sea of Thieves.
Uncertainty around Ninja Theory and Arkane
Compulsion Games and Double Fine have become independent while retaining control of their intellectual property. Undead Labs is also independent and employee-owned, and still plans to release State of Decay 3 with a new publisher; the studio announced the change on 22 September.
Xbox remains in discussions with Arkane, while the status of Marvel’s Blade is unclear. Two possible acquisitions of Ninja Theory have failed in recent weeks. Microsoft said it would consult employees about a proposed closure while continuing to consider other options.
Bethesda prioritises Fallout and The Elder Scrolls 6
Bethesda’s July roadmap covered Fallout, The Elder Scrolls and Starfield. The studio said multiple Fallout projects are in active development, with Fallout 5 still a long-term destination and currently in pre-production.
Remasters of Fallout 3 and Fallout: New Vegas are also in development, with Obsidian handling the latter. No release dates have been announced. Bethesda is planning a 30th-anniversary event in Washington, D.C., in 2027.
The Elder Scrolls 6 is the studio’s primary development focus. Bethesda says development is progressing as planned and that the team is playing the game daily.
Despite a disappointing PS5 launch, Starfield will receive further support in its third year, including new stories, gameplay improvements and additional updates. New Starborn content is planned for next year and appears aimed at existing players.
ZeniMax Online faces senior departures
ZeniMax Online Studios lost 379 employees in the latest cuts, including studio head Joe Burba, who had spent 14 years at the company. Several senior Elder Scrolls Online leaders are also leaving, including executive producer Susan Kath, game director Rich Lambert and production director Ala Diaz. The departures are expected to take place over several months to support a handover.
Staff morale and development uncertainty
The latest reductions represent Xbox’s fifth layoff wave since January 2024. A report from July described considerable anxiety among remaining staff. At id Software, 136 people were reportedly dismissed during a call lasting less than a minute.
Staff questioned the timing of cuts that arrived shortly before the launch of Doom: The Dark Ages’ major expansion. Other reports indicated that id Software may have lost as many as 95 employees, while Obsidian reportedly lost around 25% of its workforce, or approximately 60 to 70 people. Obsidian’s departing staff included an art director who had worked there for 21 years.
Game Pass falls short of its target
Game Pass reportedly has about 30 million subscribers, below Microsoft’s earlier target of 77 million players by July 2026. The last publicly reported figure was 34 million subscribers in February 2024.
The service has therefore not returned to its previous level after the substantial October 2025 price increases, which were rolled back earlier this year. For Australian players, the outcome of Xbox’s reset will shape not only subscription value but also the future range of games reaching consoles and the wider gaming industry.
What the Xbox reset means
Xbox is combining studios, moving teams between corporate divisions, cancelling projects and separating several developers from Microsoft ownership. At the same time, Bethesda is concentrating on established franchises, while Game Pass faces pressure to demonstrate stronger growth.
For players, the immediate picture is mixed: existing games continue to receive support, but several future projects and studios now face greater uncertainty. The next stages of the reset should clarify how Project Helix, Halo, Fallout and Xbox’s subscription strategy fit together.
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