Microsoft’s Xbox division plans major layoffs in July, shortly after the start of its fiscal year, amid a growing hardware component cost crisis and declining revenue [1, 2]. Xbox CEO Asha Sharma and chief content officer Matt Booty detailed the situation in a memo titled “Xbox Reset,” warning of difficult business conditions that require tough decisions [1, 2].
Over the past five years, excluding the Activision Blizzard King acquisition, Xbox has invested more than $20 billion in content, platform development, and hardware subsidies. Despite this, annual revenue has declined by nearly $500 million during that period, the executives said. Sharma and Booty added, “Going forward, this cannot continue” [1].
A critical pressure point is hardware costs for the 2027 holiday season, which are expected to be more than five times higher than two years ago [1, 2]. Sharma and Booty noted Xbox’s current platform infrastructure is not built to compete effectively. They plan to evolve and rebuild technology stacks and consider mergers and acquisitions to strengthen the division [1, 2].
The layoffs, rumored to affect approximately 1,000 employees, will help the division restructure amid these hurdles [1]. In addition, Sharma has taken steps such as making "Gears of War: E-Day" and "Clockwork Revolution" console exclusives to drive engagement on Xbox platforms [1].
On August 30, Xbox held its annual summer showcase, where Sharma announced a giveaway of a limited-edition Xbox Series X console to fans attending the event [2].
The next key milestone is the expected rollout of layoffs in July 2026, marking a significant reset for the Xbox division in response to escalating costs and competitive pressures [2].
