US-based tech giant Microsoft’s Xbox division is gearing up for another round of layoffs as its Chief Executive Officer Asha Sharma moves ahead with a restructuring plan aimed at addressing slowing revenue growth and reshaping the gaming business. As per a Bloomberg report, the layoff is expected to be announced shortly after Microsoft’s fiscal year ends on 30th June 2026. The company has not announced the number of employees who are expected to be impacted by the layoff. The report claims that the layoffs will be accompanied by reduction in spending across multiple areas of the Xbox business consisting of marketing budgets.
Sharma, along with Xbox Chief Content Officer Matt Booty, shared an internal memo with staff on June 10, laying out the financial reality facing the division. The note did not hide the truth. Xbox, she said, was “not in a healthy spot,” and a reset was coming whether people liked it or not. Almost immediately after Bloomberg broke the story, Sharma posted the internal communication publicly on Xbox Wire, which is an unusual move that signalled she wanted transparency rather than damage control.
How Bad Are the Numbers
The financial picture Sharma painted in her memo is a tough one to sit with. Excluding Activision Blizzard King, Xbox spent over 20 billion dollars on content, platforms, and hardware subsidies over five years, while annual revenue declined by nearly half a billion dollars in the same period. To put that in plain terms: the company spent more and earned less, year after year, for half a decade.
Xbox’s accountability margin, which is an internal Microsoft metric for profitability, had fallen to just 3 percent. That is an extremely thin number for a division of this size and scale. Hardware sales have declined in recent years, subscription growth for Xbox Game Pass has slowed, and Microsoft has already closed studios, cancelled projects, and increased prices across several products. Sharma was blunt about all of it. “Our current infrastructure is not prepared for the battle ahead,” she told staff.
What Changes Are Coming
Sharma, who was appointed Executive Vice President and CEO of Microsoft Gaming on February 23, 2026, replaced Phil Spencer, the long-tenured executive who had been the public face of the Xbox brand for years. One of her first moves after taking over was a leadership overhaul, bringing in several executives from her previous role at Microsoft’s CoreAI division to form a new inner circle.
Internal preparation for the cuts has been underway for weeks, and the restructuring could involve studio closures or changes to the Xbox studio lineup. Unconfirmed reports suggest the cuts could reach up to 1,000 positions, though Microsoft has declined to comment on that figure. Beyond job cuts, marketing budgets and several other operational areas are facing deep reductions, signalling a hard pivot from the expansion-era spending of the past five years toward cost discipline under the new leadership.
This is not the first time Xbox has gone through a painful period of cuts. The gaming industry as a whole has seen thousands of job losses over the past two years. But with a new CEO, a public acknowledgement of failure, and a fiscal year ending in weeks, this restructuring feels different. Sharma has made it clear that doing the same thing and expecting different results is no longer an option for Xbox. The question now is how deep the cuts go and which studios and teams will be left standing once July arrives.
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Syed Ziyauddin is a media and international relations enthusiast with a strong academic and professional foundation. He holds a Bachelor’s degree in Mass Media from Jamia Millia Islamia and a Master’s in International Relations (West Asia) from the same institution.
He has work with organizations like ANN Media, TV9 Bharatvarsh, NDTV and Centre for Discourse, Fusion, and Analysis (CDFA) his core interest includes Tech, Auto and global affairs.
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