Xbox’s ambitious reset plan has just taken another significant step forward, with a fresh wave of layoffs and major studio changes that are set to shake up the VR and gaming landscape. As part of its bid to streamline operations and focus on key franchises, Microsoft-owned Xbox has axed another 268 employees, including those from Halo Studios, Undead Labs, and Ninja Theory.
The latest redundancies bring the total number of layoffs since July’s initial announcement to a staggering 3,468, with many more expected before the end of the fiscal year. The cuts have been particularly harsh on first-party studios, with several high-profile developers let go in a bid to “realign” Xbox’s internal structure. This has led to speculation about the future of beloved franchises like Halo and Gears, which are now under the watchful eye of Activision.
One major casualty is Undead Labs, the developer behind the popular State of Decay series. Despite initial concerns that it might be shut down entirely, the studio has managed to secure a new publisher deal with Microsoft Casual Games, allowing it to continue working on upcoming titles like State of Decay 3. In fact, Booty revealed that Undead Labs will be releasing its latest game day one on Game Pass, marking a significant win for Xbox’s subscription-based service.
However, not all studios have been so fortunate. Ninja Theory, the developer behind Senua’s Saga and Hellblade: Senua’s Sacrifice, is facing an uncertain future after two separate agreements to acquire the studio fell through. As a result, Xbox will now begin consulting with employees on a proposed closure, while exploring other options for the company.
Meanwhile, Activision – fresh from its $70 billion acquisition by Microsoft in 2023 – has been handed the reins to develop the next Halo title, marking a significant shift in power dynamics within Xbox. The new team is being led by a “purpose-built” group of developers who will be responsible for creating the latest installment in the iconic franchise.
In a bid to streamline operations and focus on key franchises, Xbox is also merging several internal studios, including Rare and World’s Edge under the Activision umbrella. This move has been met with both excitement and trepidation from industry insiders, who are eager to see how it will impact the development of future titles.
Looking ahead, these changes have significant implications for the VR and gaming landscape as a whole. As Xbox continues its ambitious reset plan, we can expect more studios to be restructured or even closed altogether. With major franchises like Halo and Gears now under the watchful eye of Activision, it’s clear that Microsoft is taking bold steps to reshape its internal structure.
For VR enthusiasts, this development will undoubtedly raise questions about the future of beloved franchises and how they might evolve in the years to come. Will we see more focus on VR-specific titles from Xbox studios? And what impact will these changes have on the broader gaming industry?
One thing is clear: with this latest wave of layoffs and studio changes, Xbox’s ambitious reset plan has only just begun. As we move forward into an uncertain future, one thing remains certain – the VR landscape will be forever changed by these pivotal events.
Source: Game Developer XR — 2026-09-22