Microsoft’s Xbox division is expected to see significant job cuts starting in July, shortly after the company’s fiscal year ends on June 30. New CEO Asha Sharma, who took office in February, sent an internal memo warning of profound challenges in the games business.
The statement, also signed by chief content officer Matt Booty and published on Xbox Wire, describes a “reset” over the next 100 days. In it, the executive highlights that, excluding Activision Blizzard King, the company has invested more than US$20 billion in the last five years in content, platform and hardware subsidies, but annual revenue fell by almost US$500 million in the period. “This cannot continue”, they say.
Harsh realities exposed in the memo
Sharma and Booty list five central points. One of them is the hardware component crisis: storage costs for the 2027 season console are expected to exceed 5 times the amount paid two years ago, with memory following a similar trajectory. The company is facing difficulties in producing consoles in the quantity demanded by players and is looking for a new business model with partnerships, maintaining its commitment to the Helix Project.
Another highlight is the overextension of the studios. The expansion occurred to fuel subscription, streaming and device strategies, but left the division vulnerable in a market with more content available. There is mention of the need to reevaluate the balance between established franchises and new investments, including possible adjustments to the studio portfolio.
The platform’s current infrastructure has also been criticized for being too complex, with hundreds of dependencies and high reliance on suppliers. The plan includes rebuilding the technical stack, increasing engineering autonomy and evaluating acquisitions (M&A) to better compete in hardware, PC, mobile and streaming.
Context of recent results and past changes
Xbox has seen revenue declines in multiple recent quarters, with sharp declines especially in hardware. Game Pass returned to growth after a period of stagnation, and the company celebrated the return of console exclusives, such asGears of War: E-Day(2026) andClockwork Revolution(2027). However, the accountability margin should close the current fiscal year at around 3%, below the previous one.
This is the first major restructuring under Sharma, who replaced Phil Spencer. Sources indicate that the cuts, the exact scale of which has not yet been publicly detailed, may include budget reductions in marketing and other areas. Rumors mention the possibility of up to around a thousand vacancies affected, with potential studio closures or relocations.
What changes in practice for the Xbox ecosystem
The “reset” signals a commitment to greater efficiency and innovative hardware models, possibly opening space for partnerships with PC manufacturers using AMD chips. For gamers, this could mean efforts to stabilize console prices and availability, alongside a renewed focus on exclusives and Game Pass. The gaming industry as a whole faces cost pressure and competition for attention, with Xbox seeking to reposition itself as a leader in interactive entertainment.