Ninja Theory is at risk of closing after efforts to sell the studio fell through.
By Kris Holt Updated: Sept. 22, 2026 11:29 am EST
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Xbox is laying off 268 people and consolidating studios as part of the "reset" it announced over the summer. In a memo to staff that Xbox shared publicly, the division's Executive Vice President (EVP) and Chief Content Officer Matt Booty said the job cuts are impacting Halo Studios and other first-party developers, as well as the Xbox Game Studios management and central functions team.
In July, Xbox laid off 1,600 people and said it would cut the same number of jobs over the following year as it chases greater efficiency and higher profit margins. "The actions completed since July, inclusive of the studio divestitures, bring us roughly three-quarters of the way through previously announced restructuring," Booty wrote.
It appears Halo Studio is bearing the brunt of the latest cuts, though Xbox isn't closing it entirely. Booty said a small group will "continue supporting the Halo community and games in-market." A new team that's being formed under Activision will make the next Halo game. Activision is also now overseeing Rare and Age of Empires developer World's Edge as well.
Obsidian, which Xbox recently tasked with making a new Fallout game, is moving underneath Bethesda's umbrella, while King will oversee Microsoft Casual Games. As for Playground and Turn 10, those studios are merging and will continue to focus on Forza and Fable.
Booty noted that Xbox spun out Compulsion Games and Double Fine Productions as independent studios. Both have runway funding and the rights to their IP and back catalogs.
Similarly, Undead Labs is now once again an independent studio. State of Decay 3 is still expected to arrive next year on Xbox and PC (including on Game Pass) as well as PlayStation. Undead Labs said there should be a closed beta by the end of the year.
"Independence brings us closer to our community and lets us focus on what matters most: making the best games we can and earning the continued support of the people who choose to spend their time with us," Undead Labs studio head Philip Holt said. "State of Decay exists because millions of players have made that choice over the years, and we're dedicated to honoring their trust."
However, Xbox's efforts to sell Ninja Theory haven't worked out as yet — two separate agreements for the studio collapsed and it now faces being shuttered. "We will now begin consultation with employees on a proposed closure while continuing to explore other paths forward," Booty wrote.
Xbox is looking to divest the Lyon-based Arkane Studios as well. Under French law, Xbox had to enter a consultation period to consider options for the studio, such as selling it, spinning it out or closing it. Booty said the consultation is expected to continue through the end of 2026.
Update, September 22, 2026, 11:29AM ET: Added more details about Undead Labs going independent.
