Microsoft is reportedly planning major layoffs at its Xbox division next month–a move that comes shortly after new Xbox CEO Asha Sharma admitted its business “isn’t particularly healthy.”
According to sources speaking to Bloomberg, the layoffs will come sometime after June 30, which is when Microsoft’s fiscal year ends. In an email sent to employees on Wednesday, Sharma emphasized that annual revenue had declined “nearly half a billion” over the last five years despite more than $20 million in investments across the Xbox brand, excluding Activision Blizzard King.
“We expanded our studio system when we needed a pipeline of content to meet multiple strategies across subscription, streaming, and devices,” Sharma said. “In the process, we found ourselves overextended as we executed on changing strategies in a landscape of more readily available content.”
Sharma also emphasized that Microsoft is in a “hardware component crisis,” facing issues that have plagued much of the tech industry as more and more hardware is used for AI.
“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,” Sharma said. “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.”
It remains to be seen exactly how drastic the steps will be, but Sharma’s words suggest studio closures aren’t out of the realm of possibility. Microsoft drastically increased its number of studios under previous Xbox boss Phil Spencer, acquiring developers like Compulsion Games, Undead Labs, and Ninja Theory alongside the behemoths Bethesda and Activision Blizzard.
The upcoming layoffs, if accurate, are unfortunately not shocking. In late May, Sharma reportedly told staff that “hard choices” were coming as the Xbox brand attempts a resurgence.