Rosemary Rivera
Microsoft's Xbox division is bracing for a major round of layoffs as new CEO Asha Sharma moves to reset the struggling gaming unit, which has seen its annual revenue decline by nearly $500 million over the past five years despite $20 billion in investments.
Key Takeaways
- Xbox is planning a "major" round of layoffs that could be announced as soon as next month, according to Bloomberg.
- New Xbox CEO Asha Sharma, who took over in February, has publicly stated the division is "not in a healthy spot."
- Sharma is considering making more games exclusive to Xbox consoles and cutting marketing spending.
- Xbox has invested roughly $20 billion in hardware and software over five years while annual revenue fell nearly $500 million.
- Microsoft shares were down about 3% amid a broader pullback in tech shares.
Xbox Layoffs and Leadership Shakeup Under Asha Sharma
Microsoft's Xbox division is planning to undergo a "major" round of layoffs that could be announced as soon as next month, Bloomberg reported Wednesday. The move comes under the direction of Asha Sharma, who took over as head of the gaming division in February and has signaled that sweeping changes are necessary to turn the unit around.
Beyond workforce cuts, Sharma is also considering other strategic shifts, including increasing Xbox's focus on making games exclusive to its consoles and reducing marketing spending, according to the report. Microsoft and Xbox did not respond to Investopedia requests for comment in time for publication.
Sharma's Diagnosis: A Division That Needs a Reset
Speaking at a conference, Sharma said the Xbox division was "not in a healthy spot" and needs a fundamental reset. In a message to Xbox employees, she outlined the financial reality underpinning that assessment: Xbox has spent approximately $20 billion on investments in hardware and software over the last five years, yet in that same period its annual revenue has declined by nearly $500 million.
Sharma also acknowledged that Xbox is facing the same soaring memory costs driving higher prices across other hardware categories, but noted the company has been "impacted more greatly than many of our peers due to the choices we made over the last half decade."
"We won't succeed by hiding hard truths, nor will we succeed by doing the same thing and expecting different results," Sharma wrote.
Years of Acquisitions, Layoffs, and Studio Closures
The anticipated layoffs are the latest in a series of difficult moves Microsoft has made in its gaming business. The company spent the last several years making big investments and acquiring studios in an attempt to boost Xbox sales and close the gap with rival Sony's PlayStation 5. Despite those efforts, Microsoft has also undergone several rounds of layoffs, shuttered some studios, and canceled games as it worked to improve its margins.
Market Reaction and Outlook
Microsoft shares were down about 3% in recent trading, amid a broader pullback in tech shares. The anticipated workforce restructuring could mark the beginning of a more significant transformation under Sharma's leadership as Xbox looks to redefine its strategy, restore revenue growth, and compete more effectively in a gaming market increasingly dominated by rivals. Whether exclusive game development and leaner operations will be enough to reverse the division's trajectory remains to be seen.
