In the wake of significant layoffs at Microsoft, Halo Studios has seen at least five of its employees terminated, according to a developer familiar with the situation. Currently, the studio employs between 200 to 300 individuals.
Phil Spencer, CEO of Microsoft Gaming, addressed the Xbox division in an email on Wednesday, outlining upcoming “organizational shifts.” Employees at Halo Studios who lost their jobs were invited to a follow-up meeting with leadership, where discussions centered on severance packages. The rationale behind the layoffs echoed Spencer’s message about increasing the team’s “agility and effectiveness.”
One upset developer remarked to Engadget, “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, adding, “I wasn’t sure what part of that I was supposed to be proud about.”
As Halo Studios works on multiple projects, including the next mainline installment of Halo and the ongoing developments associated with Halo: Infinite, the atmosphere at the studio is strained. This tension has been exacerbated by ongoing challenges with a particular project. “I don’t think anybody is really happy about the quality of the product right now,” the source noted. “There’s been a lot of tension and pep talks trying to rally folks to ship.” The studio is anticipated to unveil its latest efforts at the upcoming Halo World Championship in October.
Previously known as 343 Industries, Halo Studios underwent its own layoffs in 2023, primarily impacting the campaign and narrative teams, including notable Halo figure Joe Staten. This round of cuts has contributed to the lack of ongoing storylines in Halo: Infinite since that incident. Currently, Halo Studios employs a mix of full-time workers and contractors, with junior producers and quality assurance roles often filled by temporary staff.
The studio has faced criticism from fans regarding the initial state of Halo: Infinite, and numerous former employees have highlighted the studio’s heavy reliance on contractors, who typically stay for no longer than 18 months. The developer I spoke to noted a shift towards collaborating with contracted studios in the U.S. and Europe since 2023, a strategy aimed at expediting Halo’s production. This approach parallels the development strategies of major FPS franchises like Call of Duty and Battlefield.
“Xbox in general feels years behind the curve in game development, and it leads to a lot of wasted time and effort,” the employee commented. Despite the turmoil, several departing team members have expressed fondness for their time at Halo Studios and the relationships they formed.
Microsoft’s layoffs on July 2 impacted approximately 9,000 employees globally, with around 830 jobs lost in Washington State, where Halo Studios is located. The Xbox division experienced numerous cutbacks, game cancellations, and studio closures. While a Microsoft spokesperson claimed the Xbox team did not face the bulk of the layoffs, the smaller size of the division might obscure the actual effects.
Notable cancellations within the Xbox umbrella include Rare’s Everwild and the Perfect Dark reboot from The Initiative, which was also shut down entirely. Forza Motorsport developer Turn 10 Studios reportedly lost a significant portion of its workforce, while several other studios like Rare and ZeniMax Online Studios also experienced layoffs. Notably, ZeniMax president Matt Firor is parting ways with the studio after 18 years, and veteran designer Gregg Mayles from Rare is also departing.
Microsoft’s increasing emphasis on artificial intelligence has contributed to a notable rise in its stock price. CEO Satya Nadella indicated at Meta’s Llamacon in April that up to 30 percent of the company’s code is now generated by AI. Activision disclosed its use of AI in the development of Black Ops 6 earlier this year, and while the extent of AI’s influence on these recent layoffs remains unclear, the integration of Copilot is now mandatory within Microsoft.
The developer relayed concerns, stating, “They’re trying their damndest to replace as many jobs as they can with AI agents.”
Throughout the day, news regarding various Xbox teams surfaced as employees shared their experiences on social media and communicated with multiple outlets. Microsoft had earlier laid off 1,900 Xbox employees in January 2024 and an additional 650 in September, following closures of studios such as Arkane Austin, Alpha Dog Games, and Tango Gameworks. The company recently reported a net revenue of $25.8 billion for the first quarter of 2025, reflecting an eight percent year-over-year increase in revenue from Xbox content and services.
Microsoft revealed that the layoffs would affect less than four percent of its global workforce, with a spokesperson stating, “We continue to implement organizational and workforce changes that are necessary to position the company and teams for success in a dynamic marketplace.”
