Xbox's Restructuring Isn't Over: Ninja Theory Faces Closure, and Senua's Fate Hangs in the Balance

A Studio on the Brink

Microsoft's "Xbox reset" was supposed to have a stopping point. Instead, it just produced its most consequential casualty yet: Ninja Theory, the UK studio behind the Hellblade series, is reportedly facing closure after two separate buyout agreements fell apart — and the fate of its next game, the one it had bet the whole studio on, is now genuinely unknown.

Here is what's confirmed, and what isn't.

What's Actually Confirmed

In late September 2026, Xbox cut 268 roles as part of a fresh wave of restructuring across Xbox Game Studios, according to Microsoft's own blog post on the cuts, as reported by Insider Gaming and Push Square. The reductions hit Halo Studios and other first-party teams, plus a chunk of the central Xbox Game Studios management layer.

Alongside the layoffs came confirmed internal moves: Playground Games, the Forza Horizon developer, is merging with Forza Motorsport studio Turn 10, operating going forward as one team focused on the Forza and Fable franchises. Microsoft also confirmed that Halo-adjacent teams including Rare and The Initiative's Worlds Edge are moving under Activision's umbrella, while Obsidian Entertainment shifts organizationally under Bethesda Softworks. These are internal reporting-line and structural changes rather than studio closures, and Microsoft has described them as part of consolidating overlapping functions.

The July 2026 round of this same reset is also now resolved: Compulsion Games and Double Fine Productions have returned to independent ownership, and Undead Labs has completed a similar transition, with State of Decay 3 reportedly continuing development for a new publisher under a Game Pass deal.

What's Still Genuinely Unresolved

Ninja Theory is the open wound. According to Xbox executive Matt Booty, two separate agreements to sell or spin off the studio collapsed in September, reversing an earlier Microsoft statement from July that had said Ninja Theory was already on track to join new ownership. Microsoft has since begun a UK redundancy consultation process around a proposed closure, while — per the company's own language, relayed by outlets including PCGamer and Push Square — "continuing to explore other paths forward." Some Ninja Theory staff have said on LinkedIn in October that they've already left or been told their roles are redundant, though the studio itself hasn't given numbers.

That matters because Ninja Theory had just put all 85 of its people behind a single project: Senua, the third entry in the Hellblade series, revealed at the Xbox Games Showcase in June 2026 as a full action-adventure follow-up to Senua's Saga: Hellblade II, planned for 2027 across Xbox, PC, Xbox Cloud Gaming, Steam, PlayStation 5, and Game Pass. Studio head Dom Matthews had even cancelled Ninja Theory's long-gestating horror project, Project Mara, specifically to concentrate the team on it. Microsoft has not said whether Senua would be reassigned to another studio, paused, or cancelled outright if Ninja Theory closes — which, as of this writing, is still unconfirmed either way.

Arkane Lyon is in a similar limbo, just on a slower clock. French labor law requires a formal Works Council consultation before any ownership change or closure, and reporting from Kotaku and Insider Gaming over the summer indicated that process — covering a possible sale, spinoff, or shutdown — was still running as of the most recent coverage available, with no resolution confirmed since. The stakes there are Blade, the Marvel game Arkane has been developing; multiple outlets, including The Verge's Tom Warren, have reported Microsoft is weighing cancelling it depending on how the studio's situation resolves. Arkane founder Raphael Colantonio publicly needled Xbox leadership on social media this summer, reportedly asking the company outright "how much?" to buy the studio back — a sign of just how unsettled the situation remains.

Why This Is Bigger Than One Studio

All of this sits downstream of Xbox CEO Asha Sharma's internal memo from July, obtained by The Verge, which laid out a multi-year plan to return the division to revenue growth by the end of fiscal year 2027. Sharma wrote that Xbox brought in over 200 million new players in FY26 without the business growing alongside them — the framing Microsoft has used to justify a restructuring that keeps claiming new victims months after it was first announced.

The Honest Summary

Confirmed: 268 jobs cut in September, a Playground/Turn 10 merger, Halo-adjacent teams moving to Activision, Obsidian moving under Bethesda, and three of the four studios from the July round (Compulsion, Double Fine, Undead Labs) landing on stable ground.

Unconfirmed and actively in flux: whether Ninja Theory survives in any form, what happens to Senua, and whether Arkane Lyon gets sold, merged, or shut down — along with Blade's fate. Readers should treat any claim about those outcomes as provisional until Microsoft says otherwise.

TechFinder.ae will follow up as Ninja Theory's and Arkane Lyon's situations resolve.