TL;DRMicrosoft may spin off, sell, or restructure Xbox after margins fell to 3%. Major layoffs planned for July. No decision is imminent.
Microsoft has not ruled out spinning off its Xbox division into a separate company. The Information reported that options under consideration include turning Xbox into a wholly owned subsidiary, forming a joint venture with outside partners, or selling the business outright. No decision is imminent, but new Xbox CEO Asha Sharma and Microsoft CEO Satya Nadella have left everything on the table.
The background is financial. Xbox’s profit margins collapsed to 3% this fiscal year. The division spent more than $20 billion on content, platform, and hardware subsidies over the past five years while annual revenue declined by nearly half a billion. Microsoft is also planning major layoffs in July, with significant cuts to marketing and other budgets.
Structuring Xbox as a subsidiary would mirror how Microsoft treats LinkedIn and GitHub, both of which operate with their own leadership and brand identity. A joint venture or sale would be more dramatic, effectively ending Microsoft’s two-decade run as a console platform owner.
The 💜 of EU techThe latest rumblings from the EU tech scene, a story from our wise ol' founder Boris, and some questionable AI art. It's free, every week, in your inbox. Sign up now!Sharma, who took the role in February, has secured approval to invest heavily in tentpole franchises. Halo has not had a new release since 2021. The last mainline Fallout was Fallout 4 in 2015. She has also confirmed that Gears of War: E-Day and Clockwork Revolution will be Xbox exclusives, reversing the company’s recent trend of putting games on competing platforms.
