Microsoft may hand Halo multiplayer to Call of Duty's makers

Microsoft is reportedly exploring whether Activision's Sledgehammer Games should take over Halo multiplayer development — a sign of how badly the franchise's internal studio is struggling. Sledgehammer built a basic prototype in June 2026, shelved it in early July, and no project has been greenlit. But the conversation, confirmed by Windows Central editor Jez Corden and insider Rebs Gaming, is still very much alive.

The hole Halo is in

The franchise has stumbled repeatedly in recent years. Halo Infinite (2021) underdelivered, a TV series flopped, and the July 2026 remake Halo: Campaign Evolved sold around 1.2 million copies — generating roughly $67 million — well below what Microsoft expected. For context, a single Call of Duty release routinely pulls in multiples of that. Post-launch, Halo Studios (formerly 343 Industries) reportedly laid off staff, including Campaign Evolved producer Nick Treitman, per Gaming Bible.

The studio's struggles run deeper than sales figures. Rebs Gaming claims Halo Studios abandoned multiple online-game concepts and quietly shelved plans to remake Halo 2 and Halo 3. Campaign Evolved itself was built across roughly 15 co-development studios at different stages — outsourcing isn't a new experiment here, it's already the operating model, reports WCCFtech.

Sledgehammer's pitch

Sledgehammer Games has serious live-service credentials. The studio led Call of Duty: WWII (2017, multi-platinum) and Call of Duty: Vanguard (2021, over 30 million players), both built around sustained online multiplayer. That track record is exactly why Microsoft is said to have floated the idea of having them handle Halo's multiplayer component.

The June prototype was described as a "blockout" — the earliest possible development stage, testing only basic mechanics like player movement. Its cancellation in July doesn't rule Sledgehammer out; Rebs Gaming says the studio could return with a revised proposal.

What comes next

No official statement has come from Microsoft or Activision. Halo's original creator, Bungie, handed the series to 343 Industries (now Halo Studios) back in 2007 — so external development is nothing new for this franchise. Whether Sledgehammer ends up involved or not, Microsoft appears ready to restructure how Halo gets made. The question is whether new developers can turn around a series that's been in freefall for five years.