Xbox is reportedly planning major layoffs, as Sharma tells staff: ‘We need to reassess our priorities’

Microsoft is planning major layoffs across its Xbox division next month.

That’s according to a Bloomberg report, citing people familiar with the matter, who claim that the exact scale of the layoffs is not clear, but they’re expected to take place shortly after the end of Microsoft’s fiscal year on June 30.

Xbox is also planning to significantly slash budgets for marketing and some other areas of the business, according to the report.

The cuts come following an appearance by Xbox’s new CEO, Asha Sharma at the Bloomberg Tech conference this weekend, where she said she planned on “resetting the business” which was “not in a healthy spot.”

They also come exactly a year after Microsoft’s huge 9,000 job cuts last summer, which saw the Xbox division hit hard. Notably, a planned Perfect Dark reboot was canceled, alongside Rare’s Everwild and other projects.

Microsoft also made significant cuts to its Xbox division in 2024 and 2023, including 1,900 staff cuts across Activision Blizzard, Bethesda, and Xbox.

In an email to employees on Wednesday seen by Bloomberg, and later published on Xbox Wire, Asha Sharma wrote that the Xbox business had declined to a 3% “accountability margin,” which is the metric Microsoft uses to track its profit margin.

“Excluding Activision Blizzard King, over the past five years, we have spent over $20 billion on ongoing investments in our content, platform and hardware subsidy, but our annual revenue has declined nearly half a billion during that time,” she wrote. “Going forward, this cannot continue.”

Sharma’s message suggested that Xbox will soon rethink its studio and games portfolio, in light of the cost cuts.

“We expanded our studio system when we needed a pipeline of content to meet multiple strategies across subscription, streaming and devices,” she wrote. “In the process, we have found ourselves over extended as we executed on changing strategies in a landscape of more readily available content.

“We are the fortunate stewards of industry-defining franchises that have enormous potential and player demand, but we have not adequately funded them to compete and win.

“At the same time, 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. We need to reassess the balance between these and our investment priorities for the next 5 years.”