It has been a whirlwind six years for Microsoft’s gaming division. Since the 2020 expansion, the acquisition of Bethesda, and the 2023 purchase of Activision Blizzard, the landscape has changed drastically. Now, in 2026, Xbox CEO Asha Sharma has initiated a massive corporate shake-up, bringing another round of significant layoffs to the company.

The State of Xbox Game Studios

With so many moving parts, it is worth tracking exactly who remains under the Xbox banner. While some legacy teams remain, others have been gutted or spun off entirely. Here is where the major players stand today:

  • Turn 10 Studios: Following brutal 2025 layoffs and the cancellation of a new Forza Motorsport title, the studio now functions primarily as a support team for Playground Games.
  • Rare: Still focused on Sea of Thieves, though the studio saw layoffs in 2025 and the cancellation of Everwild.
  • Halo Studios: Formerly 343 Industries, the team is currently finishing Halo: Campaign Evolved, expected this July.
  • The Coalition: Continuing the Gears of War series, they are set to ship Gears of War: E-Day this October.
  • Mojang Studios: Continues to oversee Minecraft and now reports directly to CEO Asha Sharma.
  • Obsidian Entertainment: Having released Avowed and Outer Worlds 2 in 2025, the studio remains an active part of the Xbox portfolio.
  • Playground Games: After launching Forza Horizon 6 earlier this year, the team is preparing for the Fable reboot in February 2027.
  • inXile Entertainment: Currently developing Clockwork Revolution, slated for a 2027 release.
  • World’s Edge: Continues to manage the Age of Empires franchise through third-party partnerships.

Studios Exiting the Fold

As part of the 2026 restructuring, several studios acquired during the 2018 expansion are transitioning back to independence. Compulsion Games, Ninja Theory, and Undead Labs have reached deals to split from Xbox. While details on new ownership for Ninja Theory and Undead Labs remain unknown, these teams will retain their existing IP, such as the Hellblade and State of Decay franchises, as they move forward.

Other studios have not been as fortunate. The Initiative, created specifically to reboot Perfect Dark, was shuttered in 2025. Similarly, Bethesda-owned studios like Alpha Dog and Arkane Austin were closed in 2024, with some staff reassigned internally.

Bethesda and Activision Blizzard Status

The Bethesda portfolio has faced heavy turbulence. Id Software, currently working on an expansion for Doom: The Dark Ages, was hit by recent layoffs, as was ZeniMax Online. The latter reportedly saw its staff count halved, and their previously announced Blade Runner-style project was canceled in 2025.

Meanwhile, the Activision Blizzard side remains a massive engine for Call of Duty development. With teams like Infinity Ward, Treyarch, and Raven Software all supporting the annual franchise, the workload remains high. King, the developer behind Candy Crush, now reports directly to the Xbox CEO alongside Mojang, signaling their increased importance as high-traffic platforms within the company.

For the main Arkane studio, the future remains uncertain. Reports indicate Xbox is considering a sale or closure, though the process is complicated by French labor laws, leaving the team behind Blade in a period of extended limbo.