Xbox's internal game development division has undergone a significant overhaul as of July 2026, marked by a substantial round of layoffs announced by CEO Asha Sharma. This restructuring impacts the status of the company's numerous studios, with several being sold, spun off, or closed entirely.
Longstanding Studios Face Challenges
Established studios like Turn 10, creators of the Forza Motorsport series, reportedly suffered severe layoffs in 2025, leading to the cancellation of a new Forza Motorsport title. The studio has since pivoted to a support role for Playground Games' Forza Horizon series. Rare, another veteran studio, continues its focus on the live-service game Sea of Thieves, though it also experienced layoffs and the cancellation of the long-in-development Everwild in 2025.
Halo Studios, formerly known as 343 Industries, has faced multiple rounds of layoffs since 2023. The studio is currently focused on completing Halo: Campaign Evolved, a remake of the original Halo. The Coalition, responsible for the Gears of War franchise, is preparing to launch the prequel Gears of War: E-Day in October for Xbox and PC.
Mojang Studios, acquired in 2014, remains a key asset due to the continued massive success of Minecraft, which has spawned spin-offs and a successful film. World's Edge, established in 2019, acts as a coordinator for the Age of Empires franchise, supporting third-party developers like Relic.
Acquisitions and Departures
The major acquisitions of Bethesda in 2021 and Activision Blizzard in 2023 have reshaped Xbox's studio portfolio. Blizzard Entertainment, now under Xbox, continues to develop titles across its established franchises like Warcraft and Overwatch, amidst ongoing union efforts to secure protections for its employees following multiple layoff rounds.
Activision's numerous studios, including Infinity Ward, Treyarch, and Blizzard, are largely dedicated to supporting the Call of Duty franchise. King, the mobile gaming giant behind Candy Crush, is a significant player, now reporting directly to the Xbox boss, indicating a potential shift in its reporting structure.
Toys for Bob, developers of Crash Bandicoot 4, was spun off in 2024 and is now working with Xbox on a new Spyro game. Bethesda Game Studios, acquired in 2021, continues development on The Elder Scrolls 6 and future Fallout titles following the release of Starfield and support for Fallout 76. Id Software, also acquired in 2021, recently released Doom: The Dark Ages and is working on an expansion, though the studio experienced layoffs as part of the 2026 reset.
MachineGames, known for its Wolfenstein reboot, is reportedly working on a third entry in that series after releasing Indiana Jones and the Great Circle in 2024. Zenimax Online, responsible for The Elder Scrolls Online, was hit by significant layoffs in July 2026, potentially impacting the MMORPG's future. A planned "Blade Runner meets Destiny 2" style online game was canceled in 2025.
Studios Closed or Sold
Several studios acquired during Xbox's 2018 spending spree have been divested. Compulsion Games, developers of South of Midnight, reached an agreement to become independent again in July 2026, retaining its intellectual property with ongoing support from Xbox. Ninja Theory, known for Hellblade, is transitioning to a new, undisclosed owner and plans to release the third Hellblade game in 2027. Undead Labs, creators of the State of Decay series, has also been sold to an unknown entity and is expected to release State of Decay 3 in 2027.
Obsidian Entertainment, acquired in 2018 and responsible for titles like Avowed and Outer Worlds 2, remains with Xbox and is working on updates for Grounded 2. Playground Games, acquired in the same year, has seen great success with the Forza Horizon series and is set to release a reboot of Fable in February 2027.
The Initiative, established in 2018 with the goal of rebooting Perfect Dark, was closed in 2025, and its project was canceled. Double Fine Productions, acquired in 2019, is also going independent again, retaining its IP with Xbox support.
Significant closures have also affected Bethesda's portfolio. Roundhouse Studios was merged into Zenimax Online in 2024. Alpha Dog, a mobile studio, was shut down in 2024 after releasing only Mighty Doom. Arkane Austin, developers of Prey and Redfall, was also impacted by 2024 layoffs, with some staff moving to other Bethesda studios.
Tango Gameworks, despite an initial shutdown in 2024, was acquired by Krafton and is expected to work on a sequel to Hi-Fi Rush. The core Arkane studio, known for Dishonored and Deathloop, and currently working on the Marvel game Blade, faces an uncertain future, with reports of potential sale or closure. The outcome for this studio is pending due to French labor laws.