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According to a rumor shared by YouTuber RebsGaming, Halo Infinite 2 was in development at 343 Industries before Microsoft decided to drastically change the franchise's plans. The YouTuber's anonymous source says that right after the release of Halo Infinite (December 2021), 343's campaign team began working on the sequel in the Slipspace Engine. The team reportedly had 'high hopes' for the gameplay improvements that could have been introduced in Halo Infinite 2.
However, plans changed completely when there was a leadership change inside 343 Industries in September 2022. with Bonnie Ross being replaced by Pierre Hintze. The new leadership decided to switch to Unreal Engine for future Halo games and canceled the Halo Infinite 2 project. The team was asked to start learning Unreal Engine 5, which lasted until early 2023 when Microsoft's big round of layoffs hit 343 Industries hard. RebsGaming's source was also affected, so they do not know if the team is still working on a direct sequel to Infinite or not.
Halo Infinite 2 Was in Development with the Slipspace Engine Before the Switch to Unreal Engine 5
According to a rumor, 343 Industries had started working on Halo Infinite 2 with the Slipspace Engine before the decision to switch to UE5.
wccftech.com