Microsoft’s Xbox division is preparing for another round of layoffs, with reports suggesting significant job cuts could begin shortly after the company’s fiscal year ends on June 30. The move marks the first major restructuring under Xbox CEO Asha Sharma, who took charge earlier this year amid mounting pressure on the gaming business.
The announced layoffs take place amid growing concerns about slowing growth, lower sales, and declining revenue, as well as issues with the firm’s subscription-based business model and cloud gaming business. Some sources even claim that marketing teams may suffer the most from the new plans, but Microsoft has not yet disclosed any specific figures.
For Xbox, this decision has been a long time coming. According to internal emails cited in recent reports, the company spent over $20 billion on content creation, platform development, and subsidizing hardware purchases over the last five years. Despite the company’s efforts, annual revenue dropped by almost $500 million in the same period.
Speaking of her plans for the company’s future, Sharma admits it needs a ‘reset’. She emphasizes that the gaming branch must reevaluate its strategy, refocus its investments, and redesign some of its systems to remain competitive.
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The planned layoffs appear to be part of a wider transformation effort inside Xbox. The company has already adjusted its Game Pass strategy, cutting prices after subscriber losses linked to earlier increases. Leadership has also begun reviewing the studio portfolio, platform strategy, and future hardware plans.
Reports suggest Xbox is exploring new business models, including partnerships with PC manufacturers and alternative approaches to future gaming hardware. Rising component costs, particularly memory and storage driven by AI demand, have added fresh pressure on the division’s long-term plans.
The expected workforce reductions underscore the challenges facing Microsoft’s gaming arm. With Sharma leading what she has described as a business reset, the coming months could determine how Xbox positions itself against rivals in an increasingly competitive gaming industry.