Xbox is laying off 268 employees as part of its ongoing "reset" restructuring announced in July, when 1,600 jobs were cut. In a public memo, Xbox EVP and Chief Content Officer Matt Booty said the latest reductions impact Halo Studios, other first-party developers, and central management teams. These actions complete roughly three-quarters of the previously announced restructuring.

Halo Studios will retain a small group to support existing games, while a new team under Activision will develop the next Halo title. Activision will also oversee Rare and World's Edge (Age of Empires). Obsidian moves under Bethesda to work on a new Fallout game, while King takes charge of Microsoft Casual Games. Playground and Turn 10 are merging to focus on Forza and Fable.

Xbox spun out Compulsion Games, Double Fine Productions, and Undead Labs as independent studios with funding and IP rights. Undead Labs confirmed State of Decay 3 targets a 2027 release on Xbox, PC, and PlayStation, with a closed beta by year-end. However, efforts to sell Ninja Theory collapsed twice, and the studio now faces potential closure. Xbox is also consulting on the future of Arkane Studios in Lyon under French law, with the process expected through end of 2026.