New beginnings continue to herald unfortunate ends as Microsoft Xbox reveals plans for major layoffs following Asha Sharma’s recent appointment as CEO of the company’s gaming division. Reports from Bloomberg News suggest that Xbox is set to announce job cuts next month, alongside cuts to its marketing budget and other expenses. No details have been revealed with regard to the scale of the layoffs or which studios and departments will be hit the hardest by Xbox’s restructuring so far, with the only clear evidence of the layoffs being the executive hinting at “making hard choices” amid reports of faltering sales and growing costs. The Xbox CEO, Asha Sharma, and Chief Content Officer, Matt Booty, also sent a memo to employees discussing an Xbox reset, which also hints at upcoming cuts to set operations right.
Significant layoffs at Microsoft’s Xbox division are expected next month as the business prepares to make considerable changes to operations. (Image: Pexels)
Microsoft Xbox Layoffs Expected in 2026 as the Gaming Division Explores a Comprehensive Reset
As things stand, it remains unclear whether the rumored 2026 Microsoft Xbox layoffs are a possibility or a certainty, however, considering Microsoft’s recent string of job cuts, restructuring appears to be a likely outcome. CEO Asha Sharma, who took over from Phil Spencer in February 2026, recently led the Xbox showcase, her first major appearance as the leader of Microsoft’s gaming division. While she was able to highlight what made the gaming division such a cherished part of the company’s legacy, she also revealed that the business “isn’t particularly healthy.”
In a memo released on Xbox Wire, the CEO highlighted several major issues within the gaming division’s current operations and the ways in which it was unprepared for the changing times. Pointing to flawed past investments as well as changing market scenarios pushing up costs, the pair emphasized the need for major changes to operations. Unfortunately, the memo skirted around the potential impact this reset will have on the workforce and whether their numbers will be downsized to better fit the shifting needs of the organization.
What Are Some of the Factors Contributing to the Xbox Reset?
In the memo, the executives explained that over the last 5 years, excluding Activision Blizzard King, the company has 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.” They added, “Going forward, this cannot continue.”
The pair also alluded to a “hardware component crisis,” adding that costs for these parts for the 2027 holiday season are expected to be five times the prices they paid just two years ago. Much of the memo indicated that the business was set to rework its partnerships and eliminate operational sinks that were draining the budget and causing costs to go up.
The Xbox reset comes with the promise of revisiting its platform infrastructure, with Sharma and Booty adding, “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.”
This message sparks some optimism about the internal retention and development of talent to meet the needs of the organization, but no clear strategies have been revealed to that end. We’ll likely have to wait till July to better understand whether these structural and operational changes will lead to Xbox layoffs in 2026.
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