Microsoft poured more than $20 billion into its Xbox division over the past five years. The return on that investment has been, to put it charitably, underwhelming.
Under newly appointed CEO Asha Sharma, the Xbox division is planning to close multiple studios and cut what could amount to around 1,000 positions as part of a sweeping reorganization. The layoffs are expected to land in July 2026, just months after Sharma took the reins in late February.
A $500 million problem
The math here is brutal. Xbox’s revenue has declined by approximately $500 million on a year-over-year basis. The division is operating on a profit margin of roughly 3%.
An internal memo co-signed by Sharma and Xbox Game Studios head Matt Booty laid out a “Next 100 Days” initiative. The document frames the coming months as a “reset” period, one focused on making hard choices to ensure the division’s long-term viability.
