Microsoft Hands Halo to Activision Amid Seismic Xbox Studios Overhaul

Microsoft has officially confirmed that the next mainline Halo game will be developed by Call of Duty maker Activision, a decision announced today alongside a wave of 268 layoffs sweeping through Halo Studios and the wider Xbox ecosystem. The cuts, which are the majority concentrated at Halo Studios, form part of Xbox boss Asha Sharma’s sweeping “reset” of Microsoft’s gaming business — a restructuring that has already cost roughly 3,200 staff their jobs since July. The shakeup marks the most significant reorganization in the history of Microsoft’s gaming division, as the company consolidates its first-party studios around a smaller number of flagship franchises.

According to Xbox Chief Content Officer Matt Booty, the moves completed since July — including the studio divestitures — bring the company “roughly three-quarters of the way through previously announced restructuring.” With Halo Studios effectively gutted, Microsoft has handed the franchise to Activision, which will assemble a fresh, purpose-built team dedicated solely to the next Halo title. A small remnant of Halo Studios will remain to support the community and the games currently in-market. Booty did not reveal a release date for the next entry, nor did he confirm whether Activision intends to reboot the series or slot Halo into its relentless annual release schedule for Call of Duty — a franchise that has shipped a new game every year for two decades.

A Franchise in Transition

Halo’s handover to Activision arrives against a backdrop of a troubled era under Xbox’s stewardship. Microsoft acquired the franchise when it purchased original developer Bungie in 2000, though Bungie later split away in 2007 to pursue its own looter shooter, Destiny, under a high-profile ten-year publishing deal with Activision. Microsoft subsequently established 343 Industries — named after the iconic 343 Guilty Spark from the games themselves — to carry Halo into a new generation. The lineage of mainline entries reads as a steady climb: 2012’s Halo 4, 2015’s Halo 5: Guardians, and 2021’s much-delayed Halo Infinite. Halo Infinite in particular struggled to meet expectations, and this year’s Halo: Campaign Evolved, a remake of the beloved original, faced its own set of problems.

“For Halo, our goal is clear: make the greatest Halo game ever, worthy of its universe and legacy, while staying true to what made players love it in the first place. It is a bold ambition, one that this franchise deserves.”

Rob Kostich, President of Activision

The franchise had shown signs of renewal in 2024, when 343 Industries rebranded as Halo Studios and unveiled plans for multiple new games built on Epic’s Unreal Engine. Those ambitions were showcased in a seven-minute video ahead of the Halo World Championship’s grand finals, highlighting Project Foundry — an experimental proof-of-concept for a Halo game running on Unreal. The question now facing fans is whether any of that technical groundwork will be carried forward by Activision’s newly assembled team.

Consolidation Across the Xbox Lineup

The Halo handover is only one thread in a broader tapestry of consolidation. Xbox has moved Age of Empires developer World’s Edge and Sea of Thieves maker Rare under the Activision umbrella, without confirming the legendary British studio’s next project. Meanwhile, the wider restructuring has reshaped several other teams: Obsidian, developer of Grounded, The Outer Worlds, and Avowed, is now a Bethesda studio as it begins work on a new Fallout game. Forza Motorsport developer Turn 10 is being merged with Playground, the studio behind Forza Horizon and Fable, while Candy Crush maker King now encompasses Microsoft Casual Games, which operates titles like Solitaire, Mahjong, and Minesweeper.

Booty explained the strategy behind the consolidation: “The goal is to strengthen our franchises and games by operating fewer business units, aligning groups that already work closely together, and focusing our publishing expertise.”

Looking Ahead

Today’s dramatic news leaves a number of questions unanswered. What does the future of Halo actually look like under Activision’s guidance? What plans does the company have for Rare and Sea of Thieves? And where will the remaining layoffs from the July announcement materialize? The Xbox reset is the most significant restructure in the history of Microsoft’s gaming business, and it forms part of Sharma’s ambition to reach a billion people each day through video games by 2030. That vision follows continued poor financial results for Xbox and a collapsing profit margin, which Sharma has sought to reverse by cutting costs and doubling down on marquee franchises such as Halo, Minecraft, and Fallout.

On the studio front, there is no further news on the fate of Blade developer Arkane, whose future is being negotiated with management under French employment law — a process Booty said is expected to continue through the end of the year. Elsewhere, Undead Labs has “successfully transitioned” on similar terms, and will release State of Decay 3 day one on Game Pass. As Booty concluded, “Today, our focus should be on supporting those affected and treating one another with care and respect.” He added that he will spend time with the studios over the coming week, and that at the October 6 town hall the company will reunite as an ALL-XBOX team to reflect on progress and look ahead to what he described as “one of the strongest game lineups in our history.”