Xbox spent over $20 billion on content and hardware over five years and saw annual revenue drop by nearly $500 million. Now new CEO Asha Sharma is preparing major job cuts to fix it.
Layoffs are expected in July, shortly after Microsoft's fiscal year ends on June 30, according to Bloomberg. The exact headcount is unconfirmed, but reductions are planned across marketing and other parts of the business. The Verge separately reports the restructuring could include a studio closure.
The cuts would be the first major restructuring under Sharma, who took over from Phil Spencer in February. In a memo titled "Next 100 Days: XBOX Reset" sent to employees, Sharma and chief content officer Matt Booty laid out the financial reality in stark terms.
"Going forward, this cannot continue," they wrote. Excluding Activision Blizzard King, Microsoft spent over $20 billion on content, platform investments, and hardware subsidies over the past five years. Annual revenue fell by nearly half a billion dollars in that same period.
Xbox will end the fiscal year with an "accountability margin" around 3%, down year over year. Hardware costs are compounding the problem. Storage component prices for Xbox consoles more than doubled by the time Sharma became CEO, then doubled again. Microsoft expects costs for next-gen console parts to reach five times what it paid two years ago, according to the memo.
Sharma acknowledged the business "isn't particularly healthy" and said she planned on "resetting the business." But she pushed back on the idea that her mandate is purely financial. "My mandate is not a 30% accountability margin," she said, per the report.
"It's not enterprise software margins. It's to be the number one gaming and entertainment company." The memo also revealed internal operational problems.
Xbox's platform infrastructure has become "overly complex, spanning hundreds of dependencies, which hinders our ability to move fast," Sharma and Booty wrote. The company plans to reduce reliance on external vendors and rebuild its engineering culture.
Microsoft has already signaled a shift in exclusivity strategy. At the recent Xbox Games Showcase, the company confirmed that Gears of War: E-Day and Clockwork Revolution will not launch on PlayStation or Nintendo Switch, marking a departure from the multiplatform approach that saw titles like Sea of Thieves and Forza Horizon 5 land on rival consoles. In April, Microsoft lowered Game Pass prices and ended day-one releases of future Call of Duty titles on the service.
The moves were among the first strategy changes under Sharma's leadership. The reset comes after years of expansion driven by the $68.7 billion Activision Blizzard acquisition, the largest deal in gaming history. Since that deal closed in October 2023, Microsoft Gaming has cut staff repeatedly: roughly 1,900 jobs in January 2024, about 650 in September 2024, and a Microsoft-wide reduction of approximately 9,000 in July 2025 that hit Xbox studios including King, ZeniMax, and Turn 10.
