While Microsoft itself just set a record for the biggest single-day market cap swing in history, the company’s Xbox division is struggling. How will new Xbox CEO Asha Sharma turn things around?
In a memo to staff obtained by The Verge, Sharma shared the top Xbox priorities for the current fiscal year and beyond. These included four main buckets–Core, Content, Creation, and Connection. Some of the efforts include making Minecraft “the world’s creator platform” and getting Xbox games to become “global franchises.” She also wants to “strengthen” the Xbox platform, “led by console” and undertake an effort to “extend the worlds that fans love.”
Here are the four pillars, as written by Sharma:
- CORE: Strengthen our platform, led by console
- CONTENT: Grow great games into global franchises
- CREATION: Make Minecraft the world’s creator platform
- CONNECTION: Extend the worlds that fans love
Xbox revenue decreased by 7% for the latest fiscal year, or about $1.7 billion. It’s not uncommon for businesses to have up and down swings, but what’s particularly notable here is that most of Microsoft’s other divisions are booming.
Microsoft’s Windows and Devices division dipped, too, but not by as much as Xbox. Additionally, every other business unit showed year-over-year revenue gains. Microsoft’s biggest success in the past year was its “server products and cloud services” division, which jumped by $31 billion thanks in part to the AI craze.
“Our business did not grow with our audience”
Sharma said in FY2026 (July 1, 2025-June 30, 2026), more than 200 million “new players” came to Xbox, “but our business did not grow with our audience.”
She said Microsoft must “close that gap by investing in what players value.” She said this will take time–but not that much time, at least for the first stage. Sharma said Xbox is expected to “return to growth” by the end of FY2027, so by June 30, 2027.
In her memo, Sharma said for FY2028 and FY2029, the Xbox division must “move into businesses producing meaningful player value and revenue acceleration.” She also talked about trying to “scale what works” and by FY2030, she said Xbox’s ambition is to “be halfway to our long-term daily-player goal with sustained double-digit growth in players and engagement and industry-leading margins.”
Additionally, Sharma said Xbox is already “one of the largest stadiums” out there, reaching 100 million people daily, 500 million monthly, and nearly 1 billion each year. Sharma also spoke about how important console is to Xbox, saying console “generates the majority of Xbox revenue and remains the foundation of our fandom.” Microsoft is working on a new system, Project Helix, but it may be undergoing changes due to AI-related memory and component pressures that are being fueled, in part and ironically, by Microsoft.
Also in the memo, Sharma talked about moving away from a decentralized model for game development to a system that is “more focused around our strongest franchises and biggest new ideas.” Part of this has included divesting of five studios and re-focusing on games like Fallout and Elder Scrolls that have the best chance at succeeding.
She added that Xbox leadership is coming up with “long-term plans” for the company’s biggest franchises, spanning games, film, TV, consumer products, live experiences, sponsorships, and doing more in China.
On the subject of games specifically, Sharma said Xbox already has three franchises that generate $1 billion or more annually. She didn’t name them outright, however. She also said Microsoft will invest in Minecraft “more than ever before.”
As for film and TV projects, Microsoft is working with Paramount on a Call of Duty movie that’s coming in 2028. There is also a Gears of War movie in the works for Netflix. A Gears of War animated TV show is coming as well. There is also a new Minecraft movie set for release in 2027, a third season of Fallout, and a Sea of Thieves movie. In total, Microsoft has a dozen film and TV projects in the works.
Earlier this year, Xbox’s new chief strategy officer, Matthew Ball, spoke frankly about how Xbox languished in recent years and what comes next.
Another way Microsoft is trying to get back to growth is by cutting staff. The company laid off 1,600 people this month and will part ways with another 1,600 people in the next year.
For more, check out GameSpot’s breakdown of the Xbox studios that are left and what they’re working on.
