Xbox faces new wave of layoffs next month | Bloomberg report

Microsoft’s new Xbox CEO Asha Sharma is evidently planning a major wave of layoffs next month, according to a news report in Bloomberg.

After the report appeared citing multiple unidentified sources, Sharma and Xbox Game Studios head Matt Booty sent an email to employees and posted it on Xbox Wire, where they pledged an Xbox reset in the next 100 days. Sadly, this news comes days after Xbox hit a high point with its Summer Game Fest week Xbox Showcase, where it announced 25 big games.

After multiple layoffs in the past few years, Xbox is evidently heading for more as the aftermath of its miscalculations are becoming clear to Sharma. Bloomberg said the layoffs are expected after the end of Microsoft’s fiscal year on June 30. It’s not clear how many will be affected.

While acknowledging achievements that were largely set in place before Sharma arrived, she noted there are five “realities” that the company has to navigate. In a nod to the arguments raised by newly appointed Xbox strategy leader Matthew Ball, who talked about the “attention battle” in a recent slide deck, Sharma and Booty wrote, “Going forward, our competition is attention. There are more great games, TV series, franchises, creators, content formats, apps, etc., than ever before.”

The first one noted that while there are over one billion players playing Xbox and Xbox games each year, Xbox spent $20 billion on content investments in the last five years, not counting its $68.5 billion acquisition of Activision Blizzard King. But during the same period, as the Xbox Series X/S consoles lost in competition with Sony, Nintendo and Valve, Xbox’s annual revenue declined nearly half a billion dollars.

Asha Sharma and Matt Booty. Credit: Xbox Xbox’s profit margin has dropped to 3%. “Going forward, this cannot continue,” Sharma and Booty wrote.

When I hear that number, I noted that Sharma made decisions that decreased revenue so far, such as rescinding the price increase for Xbox Game Pass subscriptions and making two big games into exclusives for Xbox. A Halo remake, Halo Campaign Evolved, is coming on July 28 and Bloomberg said that a video promoting it at Sony’s State of Play was pulled last week. That means Xbox won’t get revenue from sales on Sony’s console.

While hurting the bottom line, these moves could help restore fans’ waning confidence in Xbox. Meanwhile, money has presumably poured in from the launch of Forza Horizon 6, which has reached six million players. Evidently, these things are not canceling each other out and resulting in profit recovery. There aren’t too many other levers to pull, other than laying off more staff.

Sharma also addressed a “hardware component crisis. When Sharma joined a little over 100 days ago, the price it paid for components for console storage was over twice as high as it had paid last fall, and it has doubled again. More memory chip price increases are expected through the 2027 holiday season. This is due to the tremendous demand for AI processors from companies like Nvidia, and that in turn is creating demand for memory chips in AI systems. Those same kinds of chips and SSD storage devices are used in Xbox hardware.

This is a problem that is impacting the entire industry, and many companies are postponing launches of new consumer hardware or canceling the launches outright.

“While the entire industry is facing a components crisis, we believe we have been impacted more greatly than many of our peers due to the choices we made over the last half decade. We are currently unable to make as many consoles as players want to buy, and we need a new business model and partnerships for hardware as we remain committed to Helix,” Sharma and Booty said.

Gears of War: E-Day. Source: Microsoft They also noted that the division had overextended and not adequately funded its studios to compete and win.

“At the same time, as we saw this past weekend at Showcase, a reliable pipeline of first- and third-party exclusives and new IP are critical to our success,” they wrote. “We need to reassess the balance between these and our investment priorities for the next five years.”

There is other bad news. They wrote, “Our current platform infrastructure is not built for the battle ahead. Our systems are overly complex, spanning hundreds of dependencies, which hinders our ability to move fast. We’ve become too reliant on vendors to operate our systems and must become more self-reliant as an engineering culture to build for the future. We must increase the value we ship to players while decreasing the time it takes to do so. Going forward, we’ll evolve and rebuild our stack and look at capabilities across all of Xbox and potential M&A to help us win in hardware, PC, mobile, and streaming.”

In a talk with Fortune yesterday, Sharma noted that Xbox needed to “reset” its business, and some are now interpreting that as pending layoffs. Sharma has already decided to lower the price of Xbox Game Pass while also removing Call of Duty releases from day one on the service. And Sharma also moved to appease angry gamers by making Gears of War: E-Day and Clockwork Revolution into Xbox exclusives — a move that means those games will no longer reap extra sales from appearing on Sony’s PlayStation consoles.

Sharma and Booty are evidently turning to layoffs, but they may not achieve much. Last year, Xbox laid off hundreds of people from Candy Crush Saga mobile game maker King, it canceled the Perfect Dark reboot, and closed the studio making it, The Initiative. It also canceled an MMO at ZeniMax and canceled Rare’s Everwild. Each cancellation came with layoffs, and this comes after Xbox layoffs in each of the previous two years as well.

We have reached out for comment on the expected layoffs.

You can hijack the Covenant ghost Source: Microsoft Team,

Over the first 100 days together, we have started to revive XBOX.

Our platform teams have already shipped more updates in the last 100 days than during the prior year combined. We now have more active partners on XBOX than ever before. Our Game Pass team set to work fixing our offering and after 8+ months of decline, our service has started to grow again. And through Player Voice, we have a 24/7 channel to hear directly from players, creators, and developers.

With the XBOX Games Showcase and the return of FanFest, we brought together hundreds of millions of fans globally. We reintroduced exclusives with Gears of War: E-Day in 2026 and Clockwork Revolution in 2027. Players can continue to expect signature exclusives from us every year. In parallel, Playground Games reminded us that established franchises can achieve incredible new highs.

These results are early, but they demonstrate what is possible when we move faster, stay close to our community, and align behind a shared vision. We have made mistakes, and will continue to make them, but what matters is that we listen, learn, and adjust the course where needed. Remember, our fans are rooting for us.

Now we start the next 100 days. It is important to have both optimism and realism as we work to reset the business.

Here are the realities that we need to navigate:

#1: Over 1 billion players choose to play XBOX and our games each year, for a total of 72 billion hours across Console, PC, Mobile, and Streaming (excluding much of China and a few other properties). Our franchises are also among the largest and most beloved globally and are now breaking records in TV and film. Going forward, our competition is attention. There are more great games, TV series, franchises, creators, content formats, apps, etc., than ever before.

#2: We will end this fiscal year at about a 3% accountability margin, down year-over-year. Excluding Activision Blizzard King, over the past five years, we have spent over $20 billion on ongoing investments in our content, platform, and hardware subsidy, but our annual revenue has declined nearly half a billion during that time. Going forward, this cannot continue.

#3: We are in a hardware component crisis. When I joined as CEO in February, the price we paid for console storage components was over 2x as high as we paid last fall. These costs have since doubled again. And as we plan for the 2027 holiday season, we expect another significant increase, taking us over 5x the prices we paid only two years earlier. Memory costs have followed a broadly similar trajectory. While the entire industry is facing a components crisis, we believe we have been impacted more greatly than many of our peers due to the choices we made over the last half decade. We are currently unable to make as many consoles as players want to buy, and we need a new business model and partnerships for hardware as we remain committed to Helix.

#4: We expanded our studio system when we needed a pipeline of content to meet multiple strategies across subscription, streaming, and devices. In the process, we have found ourselves over extended as we executed on changing strategies in a landscape of more readily available content. We are the fortunate stewards of industry-defining franchises that have enormous potential and player demand, but we have not adequately funded them to compete and win. At the same time, as we saw this past weekend at Showcase, a reliable pipeline of first- and third-party exclusives and new IP are critical to our success. We need to reassess the balance between these and our investment priorities for the next 5 years.

#5: Our current platform infrastructure is not built for the battle ahead. Our systems are overly complex, spanning hundreds of dependencies, which hinders our ability to move fast. We’ve become too reliant on vendors to operate our systems and must become more self-reliant as an engineering culture to build for the future. We must increase the value we ship to players while decreasing the time it takes to do so. Going forward, we’ll evolve and rebuild our stack and look at capabilities across all of XBOX and potential M&A to help us win in hardware, PC, mobile, and streaming.

For some of you, these realities will be surprising and even frustrating to discover. We won’t succeed by hiding hard truths, nor will we succeed by doing the same thing and expecting different results. Like the ‘everyday wins’ mentality from the first 100 days, we will sprint to make progress against hardware, content, experience, and services together.

XBOX is one of the few places where people come not just to play, but to connect with others to create memories. With console at the center of how our showcase experiences are defined, Windows as one of the largest gaming platforms in the world, and incredible games under our roof as one of the largest publishers in the world, we have the foundation in place.

Let’s reset for a stronger XBOX and build the #1 gaming and entertainment company.

Asha and Mat



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