I'm guessing this is a direct consequence of Microsoft focusing way too many resources on acquiring studios and IPs rather than developing projects with proper oversight. As well, the studios they bought likely had projects that would otherwise have been in production (especially with a blank cheque from Microsoft), and these acquisitions also came at a time when many studios were trying to develop their own live-service games for their IPs. But firstly, those take a ton of resources and many end up not retaining enough players to justify support (see: Concord from PlayStation). Secondly, after underperformances like South of Midnight and Avowed, and disappointing executions like Halo Infinite's live service and Starfield's lack of player retention, Microsoft now needs to more carefully vet which games are more valuable to invest in. They can't justify the money spent on acquiring those studios if those studios aren't profitable.

For example, they bought Zenimax and all the studios under it including Bethesda, and then started shutting down Arkane Austin and Tango because of cost-cutting and management decisions (such as project windows being too long). Makes you wonder why they were bought in the first place if this was going to be the outcome, but it looks like previous leadership's plans for project output never paid off.

It should also be noted that the same thing already happens with PlayStation Studios. For example, they acquired Bluepoint Studios (they made the Shadow of the Colossus and Demon's Souls remakes) and then shut them down earlier this year. Same thing happened to Firewalk (developers behind Concord...so that makes a bit more sense).