Major Layoffs Expected at Xbox Next Month
Xbox is gearing up for a significant round of layoffs next month, as reported by various sources.
These layoffs are anticipated to occur following the conclusion of Microsoft’s fiscal year on June 30, along with additional budget cuts in marketing and other sectors. The exact number of affected employees remains unclear.
In a recent email to staff shared on Xbox Wire, CEO Asha Sharma reflected on her first 100 days at the helm of the division. She began by highlighting recent achievements but quickly shifted focus to five “realities” the company must confront. The first reality is that “over one billion players” engage with Xbox and its games annually. The second point noted that the division has invested $20 billion in content over the past five years, excluding the $69 billion spent on Activision Blizzard King. Despite this, annual revenue has dropped by “nearly half a billion” during the same timeframe, leading to a concerning 3-percent profit margin. “This cannot continue,” she stated.
Sharma then addressed the ongoing “hardware component crisis,” explaining that when she joined, the cost of console storage components had more than doubled since the previous fall, with further increases expected through the 2027 holiday season. “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 produce 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.”
Next, she reflected on Xbox’s aggressive acquisition of game studios over the last decade, admitting that the division had “overextended” itself and had “not adequately funded” its studios to effectively compete.
“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,” she added. “We need to reassess the balance between these and our investment priorities for the next five years.”
Finally, Sharma was candid about the current state of Xbox’s platform infrastructure, stating, “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 mergers and acquisitions to help us win in hardware, PC, mobile, and streaming.”
While Sharma did not mention the impending layoffs in her message, many have sensed a shift since she took over in February. She has been vocal about the necessity for “hard choices” and a “reset” for the business. So far, this has included lowering Game Pass prices and removing day-one access to Call of Duty to address the loss of “millions of subscribers” after a price hike last year; reevaluating the strategy for exclusives like Gears of War: E-Day and Clockwork Revolution; and hinting at new business models for next-gen consoles. Reports also indicate that Gears of War: E-Day was initially in development for PlayStation 5 before the decision to shift it, and a Halo trailer intended for a recent PlayStation showcase was pulled.
This news comes almost exactly a year after the last major layoffs at Xbox, which were part of broader cuts at Microsoft affecting 9,100 employees company-wide. That round resulted in 200 layoffs at King, the cancellation of a Perfect Dark reboot, the closure of The Initiative, a canceled MMORPG at ZeniMax, and restructuring at Rare following the cancellation of Everwild. This layoff followed another significant reduction of 650 positions across Xbox, which occurred just nine months after nearly 2,000 were let go.
