Microsoft has officially confirmed that Activision will develop the next mainline entry in the Halo franchise, signaling a fundamental shift in how Xbox manages its flagship property. According to an internal memo titled “Continuing Our Reset” issued by Xbox CCO Matt Booty on September 22, 2026, the move is part of a broader organizational restructure that places several legacy Xbox studios under Activision’s management umbrella.
While Activision’s oversight is confirmed, Sledgehammer Games is reportedly leading the specific development of the new project. This is supported by recent job listings for Halo-related roles at Sledgehammer’s offices in Toronto and the Bay Area. The transition follows years of internal changes at Halo Studios—formerly known as 343 Industries—which is being reduced to a small support team following the elimination of 268 roles across Xbox first-party studios.
The technical catalyst for this change dates back to October 2024, when Halo Studios confirmed a shift to Unreal Engine 5. By abandoning the proprietary Slipspace Engine, Microsoft effectively removed the specialized technical barriers that previously prevented external studios from leading development. Using a standardized engine like Unreal Engine 5 allows Activision’s developers, who are already proficient with the toolset, to take over the production pipeline without the steep learning curve associated with Halo’s legacy software.
The decision to move away from Halo Studios also follows the commercial performance of the July 2026 release, Halo: Campaign Evolved. The title reportedly sold roughly 351,000 units on PlayStation 5, a figure considered a commercial disappointment that contributed to the decision to downsize the studio and lean on Activision’s development infrastructure.
Rumors regarding the creative direction of the Sledgehammer-led project suggest it will be a “new chapter-style reboot.” This reported direction implies the game will not directly continue the storylines established in Halo Infinite or the recent remake, instead opting for a fresh start for the series. While Sledgehammer is expected to lead, the restructuring also moved management of other veteran studios, including Rare and World’s Edge, under the Activision banner to streamline production across the Xbox ecosystem.
Microsoft has not yet provided a specific release window for the next mainline Halo title, though the current transition suggests a significant development cycle is ahead as Sledgehammer integrates the franchise into its production schedule.
