Xbox announces a new round of layoffs affecting hundreds. Obsidian Entertainment joins Bethesda while Rare moves under Activision oversight in major shift.

Xbox announced a new round of layoffs on Friday, moving Obsidian Entertainment under Bethesda and placing Rare under Activision's oversight.

Details of the restructuring

Microsoft said the cuts will affect several hundred employees across its Xbox division. The company confirmed that Obsidian will join Bethesda to develop titles such as Grounded and a new entry in the Fallout series. Rare will report to Activision, which will lead development on upcoming projects for the studio.

Impact on ongoing games

Xbox did not specify which titles will be directly affected, but the announcement follows earlier moves that saw Halo Studios gutted and the next mainline Halo game handed to Activision. The restructuring also includes the shutdown of Ninja Theory, a studio known for narrative-driven titles.

Industry reaction

Analysts said the layoffs reflect Microsoft’s effort to consolidate resources after a series of acquisitions. One analyst wrote that the realignment could streamline development pipelines but warned that morale may suffer among remaining staff.

Employee groups on social media expressed concern over job security, while some former developers praised the decision to focus on fewer, higher‑profile franchises.

Next steps

Microsoft indicated that further consolidation could occur as the company evaluates the performance of its studio portfolio. No timeline was provided for additional actions.

The company emphasized that the changes aim to strengthen its long‑term gaming strategy and improve the delivery of new content across Xbox and PC platforms.