Recent Microsoft layoffs have triggered widespread unease across Xbox teams, with multiple studios and projects reportedly impacted. The Initiative’s revival of Perfect Dark has been discontinued, while ZeniMax Online’s anticipated Project Blackbird MMO was axed alongside the departure of its founding lead. Rare’s in-development IP Everwild met a similar fate, coinciding with veteran designer Gregg Mayles’ exit, and Turn 10 Studios faced extensive staff reductions.

According to Engadget, Halo Studios lost five team members, with sources indicating deeper issues in Microsoft’s gaming strategy and ongoing Halo titles. An employee criticized Xbox leadership’s messaging, particularly Phil Spencer’s internal address highlighting record engagement metrics amid workforce cuts:

It’s infuriating to hear executives tout financial success while gutting teams. What exactly are we celebrating here?

The insider revealed growing reliance on external contractors across North America and Europe for Halo development, calling the strategy inefficient: Xbox’s outdated workflows lead to constant redundancy. They’re playing catch-up while burning resources.

Concerns also emerged about automation initiatives displacing roles: Leadership is aggressively pursuing AI to eliminate positions wherever possible.This aligns with Microsoft’s broader AI investments, though its impact on development remains uncertain.

Doubts linger regarding Halo’s quality standards, per the source: Morale has tanked. Management keeps pushing rushed deadlines, but no one believes we’re delivering top-tier work.

These revelations follow Halo Studios’ tease of a major announcement at October’s HaloWC 2025. After Halo Infinite’s struggles, the rumored project faces immense pressure to succeed—or risk further studio downsizing.