Microsoft’s gaming division, Xbox, is preparing to lay off employees and reduce spending as the company moves to address declining revenue and restructure the business under its new leadership.
According to a Bloomberg report, the layoffs are expected shortly after Microsoft’s fiscal year ends on June 30. While the number of affected employees has not been disclosed, the planned cuts are expected to go beyond staffing, with reductions also being considered across marketing and other operational budgets.
The restructuring will be the first major overhaul since Asha Sharma became chief executive of Xbox in February.
Sharma reportedly outlined the challenges facing the gaming business in an internal message to employees. She said Xbox’s accountability margin had fallen to just 3% despite the company spending more than $20 billion over the past five years on content, platforms and hardware subsidies. During the same period, annual revenue declined by almost $500 million.
The Xbox chief told staff the business would need to rebuild parts of its platform infrastructure and reassess its portfolio in the months ahead. Bloomberg reported that Sharma and Chief Content Officer Matt Booty have described the current period as an “Xbox Reset”, aimed at putting the division on a more sustainable path.
The planned changes come as Xbox works to overcome challenges across several parts of its business. Microsoft’s drive into subscription gaming and cloud services has not delivered the growth needed to offset weaker console sales.
At the same time, the company has faced complaints over a lack of major exclusive titles capable of driving hardware demand.
Growth in Game Pass subscriptions has also stalled. In April, Microsoft cut Game Pass prices and announced that future Call of Duty titles would no longer launch on the service on day one, marking one of the first major strategic changes under Sharma’s leadership.
The company is also dealing with high hardware costs. Reports say increasing component prices have significantly raised storage costs, creating additional pressure on Microsoft’s long-term console plans, including work linked to its next-generation gaming platform, codenamed Helix.
As part of the reset, Xbox is expected to place greater emphasis on its biggest gaming franchises, including Halo, Gears of War and Forza.
The company recently confirmed that upcoming titles such as Gears of War: E-Day and Clockwork Revolution will not launch on competing platforms including PlayStation and Nintendo Switch, while it focuses on strengthening the Xbox ecosystem.
Microsoft has not publicly commented on the reported layoffs.
