Which development studio owned by Microsoft do you think is their current best in terms of quality output? This includes all the studios they have acquired by buying Bethesda and Activision?

Back in the heyday of Halo, the answer would easily be Bungie. A lot has changed obviously since then. 

I can't even keep track of all the studios that Microsoft own now.

Playground games.
Every Forza Horizon game is fantastic,

Shit, I didn't even see this and posted a similar thread about best dev in general lmao

For this one, I'm gonna go with either Ninja Theory or id Software, both of which have made some absolute bangers.

In terms of nostalgia I'll say Rare.
Nowadays I think an argument can be made for Obsidian.

Machinegames.

Worst is Ninja Theory. They will never figure out how to do combat right.

Probably Playground Games. The Forza Horizon series has been consistently excellent on X1 and XS.

Besides them, maybe Arkane Lyon? Dishonored 1/2 and Deathloop were all critical success stories.

These are my current top 5 studios.

Playground games
Obsidian Entertainment
Machinegames
Arkane Lyons
Double Fine

Inxile could make the list after Clockwork Revolution releases.

I would say World's Edge, but they're more caretakers rather than a proper development studio, so I'd have to say Double Fine. I've been a long time fan and they're by far the most creative studio under Microsoft. Hell, they've got a game about an anthropomorphic LIGHTHOUSE releasing in 2 months lol, and it looks amazing!

They've got some great studios though from Obsidian, inXile, MachineGames, id Software, and Playground Games, but Double Fine, you just never know what to expect from them.

Halo Studios and The Coalition still have to prove themselves to me to hop on the hype train. Both studios have new leadership and vision as to how to handle Halo and Gears, and I'm optimistic to see how these new visions play out.