Microsoft Xbox to cut about 3,200 jobs and reshape key studios including Rare and Halo franchise

Microsoft’s Xbox division announced its largest restructuring to date, targeting roughly 3,200 employee reductions across fiscal year 2027. An internal memo detailed an immediate cut of about 1,600 positions and the transfer of four first‑party studios to new ownership, while other studios will undergo consultation on strategic options.

Industry reports indicate the upcoming public announcement, expected around July 6, will affect more than 1,000 employees across the Xbox portfolio. Conflicting rumors have placed the historic Rare studio, known for Sea of Thieves, on a potential sale list, though other insiders claim Rare and Obsidian Entertainment are not slated for closure. Meanwhile, Xbox is planning a major overhaul of the Halo franchise, aiming to “fix” the series and allocate additional resources after recent under‑performance.

The restructuring follows earlier studio closures (Ninja Theory, Double Fine, Compulsion Games) and follows a period of declining margins and a weaker hardware market. Microsoft intends to streamline management layers, refocus on high‑priority content, and shift studios such as Mojang and King to report directly to Xbox leadership.