Microsoft’s Xbox division is expected to face significant layoffs next month, according to sources familiar with the company’s plans. The information comes shortly after the sending of an internal memo by CEO Asha Sharma and chief content officer Matt Booty, which warn of a “reset” in the next 100 days.
The document recognizes serious financial challenges. Excluding Activision Blizzard King, the company has spent more than $20 billion over the past five years on content, platform and hardware subsidies, but annual revenue has fallen by nearly half a billion dollars over that period. “This cannot continue,” say the executives.
Component crisis impacts hardware for 2027
One of the central points of the memo is the “hardware component crisis”. Storage costs for the 2027 holiday season are expected to exceed prices paid just two years ago by more than five times. Memory follows a similar trajectory. This escalation, driven largely by AI demand for data centers, affects the entire industry, but impacts Xbox most due to previous choices.
Sharma and Booty highlight that the platform’s current infrastructure is not prepared for the challenges ahead. They plan to evolve and rebuild the technology stack, evaluating capabilities in hardware, PC, mobile and streaming, including possible acquisitions (M&A).
Strategic changes and partnerships on the horizon
The text mentions the need for a “new business model and partnerships for hardware”, maintaining the commitment to Helix. Executives have been talking about “radically different” console models. This paves the way for Xbox-branded devices made by PC makers based on AMD chips.
Since taking over, Asha Sharma has already made decisions such as making Gears of War: E-Day and Clockwork Revolution exclusive to Xbox consoles. The memo reinforces the focus on annual subscription exclusives and the goal of becoming the leading games company.
Impact for players and comparisons with the past
The layoffs, expected in July after Microsoft’s fiscal year ends on June 30, include cuts to marketing and other areas. Rumors mention possible studio closure or portfolio adjustments. This would be another chapter of restructuring, after previous waves in the division.
In practice, the reset seeks to balance expenses and revenue in a competitive market. While rivals like PlayStation and Nintendo also face rising costs, Xbox is betting on partnerships and efficiency to avoid price increases that alienate the public. Success will depend on how these changes affect Game Pass, launches, and player support.
The memo recognizes that studios are “overextended” and that the balance needs to be reassessed. For fans, the period brings uncertainty about jobs in the industry, but also hope for a more focused and sustainable Xbox.