Microsoft is cutting fewer than 600 jobs globally, extending a restructuring programme that has affected its gaming business and other divisions, including cloud computing, artificial intelligence, marketing and research.
The latest reductions, announced on Tuesday, September 22, include approximately 300 positions in Washington state, according to the company.
Within Xbox, 268 roles are being eliminated across first-party studios, Halo Studios and management and operational teams.
The cuts form part of a broader effort to reduce operating costs, consolidate development operations and improve the profitability of Microsoft’s gaming business.
The restructuring also involves significant changes to the ownership and management of several game franchises, with Activision taking responsibility for development of the next Halo title and other studios being merged, transferred or prepared for possible separation from Microsoft.
Xbox restructuring reaches 75% completion
Microsoft said the latest Xbox job reductions are included in the approximately 3,200 positions the division announced it would eliminate in July. That figure represents roughly 20% of Xbox’s workforce.
The company said the restructuring is now approximately 75% complete.
Matt Booty, Xbox’s chief content officer, said the changes were intended to consolidate publishing operations and bring teams that already work closely together under fewer organisational units.
The restructuring is being overseen by Xbox chief executive Asha Sharma, who has been tasked with returning the gaming business to growth and profitability.
The changes extend beyond staffing reductions. Microsoft is reorganising its development studios and shifting responsibilities for several major franchises, reflecting a broader effort to simplify the structure of its gaming operations.
Activision takes over development of the next Halo game
Microsoft is transferring development of the next Halo game to Activision, the publisher it acquired in 2023 for $68.7 billion.
The project will be handled by a newly assembled team operating separately from the group responsible for the Call of Duty franchise.
Halo Studios, formerly known as 343 Industries, will retain a smaller team at its Redmond, Washington, headquarters. That team will support existing Halo titles, the player community and esports activities.
Activision president Rob Kostich said the company had begun assembling a team specifically for the project, with the aim of producing a game that respects the franchise’s established identity and history.
The transfer places one of Microsoft’s most recognisable gaming properties under a different publishing operation as the company reorganises its portfolio.
More studios face consolidation or ownership changes
The restructuring affects several other development studios and franchises:
- World’s Edge: The Redmond-based studio behind Age of Empires is moving under Activision.
- Rare: The British studio responsible for Sea of Thieves is also being transferred to Activision.
- Obsidian Entertainment: The California-based developer will become part of Bethesda. Obsidian, which developed Fallout: New Vegas for Bethesda in 2010, is also working on another game set in the Fallout universe. Its Grounded franchise will move with it.
- Microsoft Casual Games: The Redmond team behind Microsoft Solitaire and other Windows games will move under King, the company known for Candy Crush.
- Turn 10 Studios and Playground Games: The two developers will merge into a single studio responsible for franchises including Forza and Fable. The studios have collaborated on Forza for approximately a decade.
- Undead Labs: The Seattle studio behind State of Decay has been spun off from Microsoft. The company said the transition followed arrangements similar to those involving Compulsion Games and Double Fine, which became independent in August. State of Decay 3 is expected to launch on Game Pass on its first day under a new publisher.
Ninja Theory and Arkane face uncertain futures
Ninja Theory, the British developer behind the Hellblade series, remains at risk of closure after two proposed transfer arrangements fell through.
Microsoft has told employees that the studio could shut down, although it continues to seek a potential buyer or other arrangement that would allow it to operate outside the company.
Arkane’s French studio is the remaining operation among five studios Microsoft said in July it intended to divest. Consultations are expected to continue through the end of the year, with no final outcome announced.
The uncertainty surrounding the studios highlights the consequences of Microsoft’s decision to reduce the number of business units and consolidate its gaming operations.
Job cuts extend beyond Xbox
The latest reductions also affect parts of Microsoft’s business outside gaming.
The company described these cuts as part of its regular reassessment of staffing requirements, saying there was no single cause behind the decisions.
Further details about the Washington state layoffs, including the specific roles affected, are expected to emerge through a notice filed with state employment officials.
Microsoft and other major technology companies have been scrutinising operating expenses while committing substantial sums to artificial intelligence and cloud infrastructure.
The latest announcement follows a series of workforce reductions at Microsoft.
In July 2026, the company eliminated approximately 4,800 jobs worldwide, or about 2% of its workforce, including 605 positions in Washington state.
During 2025, Microsoft cut more than 15,000 jobs in two major rounds: approximately 6,000 in May and another 9,000 in July. Those reductions included around 830 Washington-based positions.
The company also introduced a voluntary retirement programme for eligible US employees for the first time this year. Approximately 30% of the roughly 8,750 employees eligible for the offer accepted it, reducing the number of compulsory layoffs required in July.
Microsoft continues recruiting while cutting jobs
Despite the workforce reductions, Microsoft is continuing to recruit in selected areas.
The company said approximately 850 university hires joined in August, while it hosted 1,300 interns over the summer. Microsoft said many interns are considered for full-time positions.
The combination of layoffs and recruitment reflects a redistribution of staffing rather than a complete halt to hiring across the business.
For employees, however, the restructuring means that opportunities and job security increasingly depend on the teams and business units in which they work.
Technology industry layoffs continue across the Seattle region
Microsoft’s latest announcement comes amid a wider pattern of workforce reductions across the Seattle-area technology sector.
Oracle eliminated 359 Washington state jobs last week, while Zillow cut more than 500 positions in August in its largest layoff round of the year.
Other companies that have announced reductions in the region since July include Amazon, Starbucks, T-Mobile, Google, Salesforce, TikTok, Uber and Qualtrics.
The repeated cuts illustrate the pressure technology companies face as they review staffing levels, reorganise operations and redirect investment towards strategic priorities such as artificial intelligence and cloud computing.
For Microsoft, the Xbox changes are particularly significant because they combine workforce reductions with a fundamental reshaping of the business’s development and publishing structure.
The outcome will depend not only on whether the company reduces costs, but also on how effectively its reorganised studios manage major franchises and deliver new games.
For now, Microsoft says its Xbox restructuring is three-quarters complete, with further changes still to come.
