The final master explained

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He-Man absorbs the magic with his Sword of Power, dividing it into two and reverting him to his original form, shocking Teela. But this time around, Skeletor’s plan is successful and he shatters the orb to release the power. He-Man and his team show up to thwart their plan once again, Teela fighting alongside.

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He and Evil-Lyn reach the secret facility at the castle, where all of the world’s magic is stored as an orb. During Teela’s knighting ceremony as the new Man-At-Arms, Skeleton attacks the Castle of Grayskull.