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Concerns over possible layoffs at Xbox are growing after newly appointed chief executive officer Asha Sharma shared a memo outlining the challenges facing Microsoft’s gaming division and the need for a major business reset.
The memo, which was published on Xbox Wire following this year’s Xbox Games Showcase, did not directly confirm job cuts. However, it highlighted several financial and operational issues that the company must address as it reshapes its future strategy. The message comes amid reports from Bloomberg suggesting that significant staff reductions could begin at Xbox in July, although the company has declined to comment on those reports.
In the memo, Sharma reflected on the first one hundred days since taking over leadership of Xbox, saying the company has already made notable progress. Platform teams have reportedly delivered more updates during that period than in the previous year combined, while Game Pass has started growing again after more than eight months of decline. Xbox also pointed to stronger engagement with players through its Player Voice initiative and the success of its recent Games Showcase event.
The showcase featured upcoming exclusive titles including Gears of War E Day, expected in 2026, and Clockwork Revolution, planned for 2027. According to Sharma, players should continue expecting major Xbox exclusives every year as the company works to strengthen its gaming portfolio.
Despite these achievements, the memo paints a challenging financial picture. Sharma revealed that Xbox expects to finish the current fiscal year with an accountability margin of about three percent, a decline from the previous year. Excluding Activision Blizzard King, the company has spent more than 20 billion dollars on content, platform development, and hardware subsidies over the past five years while annual revenue has fallen by nearly half a billion dollars during the same period.
The memo also points to a growing hardware component crisis. Storage costs for Xbox consoles have reportedly risen to more than five times what they were two years ago, while memory prices have experienced similar increases. Sharma acknowledged that although the entire gaming industry is facing component shortages and rising costs, Xbox believes it has been affected more severely because of decisions made over the past several years.
Another issue highlighted is the expansion of Xbox Game Studios during a period when the company sought to support multiple strategies across subscriptions, streaming, devices, and content creation. Sharma admitted that the company may have stretched itself too far and that investment priorities must now be reassessed over the next five years to ensure its major franchises receive the funding needed to compete successfully.
The memo also criticized Xbox’s current platform infrastructure, describing it as overly complex and too dependent on outside vendors. The company plans to simplify its systems, improve engineering efficiency, and reduce development time while continuing to invest in hardware, personal computer gaming, mobile gaming, and streaming services.
Sharma acknowledged that these realities may be surprising and frustrating for employees but insisted that Xbox must face difficult truths if it hopes to regain momentum. She concluded by expressing confidence that with its strong gaming franchises, Windows platform, and global player community, Xbox has the foundation needed to rebuild and pursue its goal of becoming the world’s leading gaming and entertainment company.
