MS Hands the Next Halo Game to Activision Amid Major Xbox Restructuring

MS has confirmed that the next mainline Halo game will be developed by Call of Duty maker Activision, as mass layoffs hit Halo Studios amid a significant restructuring of its Xbox studio organization.

Xbox Announces 268 Additional Layoffs

Xbox announced 268 layoffs today “across Halo Studios, other first-party studios, and the XGS management and central functions layer” as part of the ongoing cuts first announced in July.

The majority of the layoffs are at Halo Studios. The cuts form part of new Xbox boss Asha Sharma’s “reset” of MS’s gaming business, which had already resulted in 1,600 job losses during the summer. At the time, MS said another 1,600 positions would be eliminated during the current financial year.

“The actions completed since July, inclusive of the studio divestitures, bring us roughly three-quarters of the way through previously announced restructuring,” Xbox Chief Content Officer Matt Booty said in a blog post. “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.”

Activision Takes Over Development of Halo

With Halo Studios severely reduced, MS has handed the franchise to Activision. Booty said Activision will develop “the next Halo title,” led by “a new, purpose-built team that is separate from ongoing development and plans for Call of Duty.”

“A small team at Halo Studios will continue supporting the Halo community and games in-market,” Booty added.

Booty did not reveal when the next Halo game will be released. He also did not say whether Activision plans to reboot the series or incorporate it into a release schedule similar to that of Call of Duty, which has maintained annual releases for 20 years.

Halo’s History Under MS

Halo’s move to Activision follows a series of difficult releases for the franchise under Xbox’s stewardship. MS acquired Halo when it purchased original developer Bungie in 2000. Bungie separated from MS and became independent again in 2007 before beginning work on looter shooter Destiny through a high-profile, 10-year publishing agreement with Activision.

MS subsequently established 343 Industries, named after the Halo character 343 Guilty Spark, to guide the franchise into a new era. The studio’s first Halo release was 2012’s Halo 4, followed by 2015’s Halo 5: Guardians and the significantly delayed Halo Infinite in 2021. Halo Infinite struggled in particular, while this year’s Halo: Campaign Evolved, a remake of the first Halo game, encountered problems of its own.

The Future of Halo Studios’ Unreal Engine Work

In 2024, 343 Industries changed its name to Halo Studios and announced plans to develop multiple new Halo games using Epic’s Unreal Engine. The announcement came through a seven-minute video shown before the Halo World Championship grand finals, presenting the results of Project Foundry, an experimental project created to demonstrate a Halo game built with Unreal Engine.

Although it was little more than a technology demonstration, the video offered a glimpse of a potential fresh start for Xbox’s flagship franchise following Halo Infinite’s troubled launch. It remains unclear whether Activision will carry any of that work forward. Ryan McCaffrey examined the news in his opinion article, Can Activision Save Halo?

Rare and World’s Edge Move Under Activision

Xbox has also moved Age of Empires developer World’s Edge and Sea of Thieves developer Rare under the Activision umbrella. MS did not confirm the legendary British studio’s next game.

Activision President Rob Kostich issued the following statement:

“We’re thrilled to welcome Halo, Rare, and World’s Edge to Activision. It’s an honor and a responsibility that we do not take lightly. These teams and their games have inspired fans around the world for decades.

“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. We have already begun assembling a purpose-built team, unique in capability and talent, ready and excited to deliver this next chapter with the community.

“To the World’s Edge and Rare teams, we can’t wait to get to work together.”

Further Changes Across Xbox Studios

Outside Activision, 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 Games, the developer of Forza Horizon and Fable. Candy Crush developer King now includes MS Casual Games, which operates titles including Solitaire, Mahjong, and Minesweeper.

Ninja Theory and Arkane Face Uncertain Futures

MS has also signaled its intention to close Hellblade developer Ninja Theory after two separate sale agreements fell through. In accordance with UK employment law, a consultation with staff has begun.

Ninja Theory had been developing the third entry in the Hellblade series, titled Senua, but the game’s future is now uncertain.

There is no further news about the fate of Blade developer Arkane. MS is currently negotiating with management over the studio’s future in accordance with French employment law, leaving the process further behind those involving other Xbox studios.

Booty said that “consultation with Arkane remains underway and is expected to continue through the end of the year.”

Undead Labs Transitions to Independence

Psychonauts developer Double Fine and South of Midnight studio Compulsion had already secured their independence as part of the Xbox reset. Booty has now confirmed that Undead Labs has “successfully transitioned” on “similar terms.” With a new publisher, the studio will release State of Decay 3 on Game Pass on day one.

“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,” Booty added.

Major Questions Remain Unanswered

The dramatic changes raise several unanswered questions: What will the future of Halo look like? What does Activision plan to do with Rare and Sea of Thieves? And where will the remaining layoffs announced by MS in July occur?

The Xbox reset is the most significant restructuring in the history of MS’s gaming business. It forms part of Sharma’s effort to reach one billion people each day through video games by 2030.

The restructuring follows continued poor financial results for Xbox and a collapsing profit margin. Sharma is seeking to reverse that trend by cutting costs and increasing investment in major franchises such as Halo, Minecraft, and Fallout.

“Today, our focus should be on supporting those affected and treating one another with care and respect,” Booty said. “I will spend time with our studios over the next week. At our October 6 town hall, we will come together as an ALL-XBOX team to reflect on our progress and look ahead to one of the strongest game lineups in our history.”