Layoffs at Microsoft
At least five employees at Halo Studios have been let go as part of the company-wide layoffs at Microsoft that took place on Wednesday. According to a developer with knowledge of the situation, this leaves an estimated 200 to 300 people remaining at the studio.

Email from Microsoft Gaming CEO
Employees across Microsoft’s Xbox division received an email from Microsoft Gaming CEO Phil Spencer on Wednesday morning, addressing the "organizational shifts" that will be hitting the team over the coming days. The email was followed by a meeting with organization leaders for the laid-off Halo Studios employees, where discussions of severance packages took place. The reasons provided for the firings aligned with Spencer’s memo, which cited the need to "increase agility and effectiveness."

Reaction from Employees
One developer expressed frustration with the timing of the layoffs, stating, "I’m personally super pissed that Phil’s email to us bragged about how this was the most profitable year ever for Xbox in the same breath as pulling the lever" on the layoffs. The developer questioned what part of this they were supposed to be proud about.

Current Projects at Halo Studios
Halo Studios is currently working on multiple games, including the next mainline Halo installment, and is the steward of Halo: Infinite, which is quietly spinning down its content cadence. The mood at the studio is tense, especially when it comes to one project that was recently in crisis, according to the developer. The developer stated, "I don’t think anybody is really happy about the quality of the product right now. There’s been a lot of tension and pep talks trying to rally folks to ship."

Previous Layoffs and Cancellations
Halo Studios was rocked by layoffs in 2023, back when it was still called 343 Industries, and that culling mostly affected people on the campaign and narrative teams, including Halo veteran Joe Staten. The studio has also been affected by the recent cancellations of games such as Everwild and Perfect Dark reboot. Turn 10 Studios, the developer of Forza Motorsport, reportedly lost a "vast majority" of its employees, and other studios such as Rare, ZeniMax Online Studios, King, Raven, Sledgehammer Games, and Halo Studios have all been affected by the layoffs.

Use of AI in Game Development
Microsoft has increasingly focused on AI, with CEO Satya Nadella stating that as much as 30 percent of the company’s code is now written by AI. Activision has also admitted to using AI in game development, specifically in Black Ops 6. The use of AI in game development has raised concerns among employees, with one developer stating, "They’re trying their damndest to replace as many jobs as they can with AI agents."

Impact of Layoffs on Xbox Teams
The layoffs at Microsoft on July 2 affected 9,000 employees globally, including 830 in Washington, where Halo Studios is based. The Xbox division endured significant firings, game cancellations, and studio closures. Microsoft reported a net revenue of $25.8 billion in the first three months of 2025, with an eight percent yearly increase in revenue from Xbox content and services.

Statement from Microsoft
Microsoft told Engadget that the layoffs will affect less than four percent of the company’s global workforce. A statement from a Microsoft spokesperson reads, "We continue to implement organizational and workforce changes that are necessary to position the company and teams for success in a dynamic marketplace."