Xbox is planning a major wave of layoffs next month, according to a Bloomberg report.
This comes from multiple sources speaking to Bloomberg, who said the layoffs are expected after the end of Microsoft’s fiscal year on June 30, alongside other spending cuts to marketing and other areas. The number of individuals who will be impacted is not yet known.
In an email sent to employees today and posted on Xbox Wire, CEO Asha Sharma reflected on her first 100 days running the division, first focusing on recent successes, but then turning to five “realities” that she says the company needs to navigate. While the first is that “over one billion players” play Xbox and Xbox games each year, the second is that the division had spent $20 billion on content investments in the last five years, not including Activision Blizzard King (which cost Microsoft $69 billion). However, its annual revenue declined “nearly half a billion” over the same period, and its business has apparently dropped to a 3-percent “accountability margin,” or profit margin. “Going forward, this cannot continue,” she wrote.
Third, Sharma addressed the “hardware component crisis,” saying that when she joined the company, the price it paid for console storage components was over twice as high as it had paid last fall, and it has since doubled again, with more increases expected into 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 make 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.”
Fourth, Sharma reflected on Xbox’s buying spree of game studios over the last decade, saying the division had “over extended” and had “not adequately funded” its studios 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,” she continued. “We need to reassess the balance between these and our investment priorities for the next 5 years.”
Finally, Sharma was blunt: “Our current platform infrastructure is not built for the battle ahead. 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 M&A to help us win in hardware, PC, mobile, and streaming.”
Though Sharma did not address the reported coming layoffs in her letter, some would argue the writing has been on the wall since Sharma took over the division in February. Sharma has been vocal on the interview circuit about the need to make “hard choices” and the idea of a “reset” for the business. Up to now, that’s largely involved dropping the price of Game Pass and removing day-one Call of Duty releases from the service to compensate after the service lost “millions of subscribers” following a price increase last year; rethinking the company’s strategy on exclusives for Gears of War: E-Day and Clockwork Revolution; and suggesting that new business models may be on the horizon for next-gen consoles. Bloomberg also confirms prior reporting that Gears of War: E-Day was originally planned for PlayStation 5 and was already in development for Sony’s console before this change was made, and reports that a Halo trailer that was intended to appear at the most recent PlayStation State of Play showcase was pulled.
This comes almost exactly a year out from the last mass layoff at Xbox, which came as part of larger cuts at Microsoft impacting 9,100 individuals company-wide and which resulted in 200 individuals laid off from Candy Crush maker King, a canceled Perfect Dark reboot and the closure of studio The Initiative, a canceled MMORPG at ZeniMax, and a canceled Everwild with developer Rare being restructured. That layoff was less than a year after another mass layoff of 650 across Xbox, which itself was only nine months after a layoff of nearly 2,000.
Kotaku has reached out to Xbox for comment.
