GoKawiilWhat we know so far: As Microsoft faces rising component costs and declining hardware sales, Xbox's new CEO recently suggested that major changes are in store for the gaming division. While specific details are scant, reports indicate that yet more Microsoft employees will lose their jobs in the coming weeks, adding to the tens of thousands laid off over the past few years.
Although Xbox chief Asha Sharma didn't say "layoffs" in her recent memo to staff, the message's tone certainly gives off the feeling that they're coming. Sources recently informed Bloomberg that layoffs are indeed on the horizon as Microsoft tries to save its console gaming business.
In an email to employees that Microsoft later published on the Xbox blog, Sharma stated that the company overextended itself when purchasing numerous large studios to bolster its in-house content pipeline. These included Elder Scrolls owner ZeniMax, celebrated RPG studio Obsidian Entertainment, and, most famously, the $69 billion acquisition of Call of Duty publisher Activision Blizzard.
Microsoft layoffs since 2023
Date (announcement) Reported headcount cut Main business areas hit 18 Jan 2023 10,000 Windows & devices, Xbox, HoloLens, recruiting & marketing 25 Jan 2024 1,900 Activision Blizzard, Xbox, ZeniMax after the ABK deal closed 3 – 4 Jun 2024 ≈1,000 (internal est.) Azure for Operators, HoloLens/mixed-reality, other "moon-shot" teams 12 Sep 2024 ≈650 Xbox publishing & game-studio support teams Jan – Feb 2025 ≈2,000 Company-wide "low-performer" cull (no severance in many cases) 13 May 2025 ≈6,000 (Microsoft says "< 3% of staff") All geographies; focus on middle-management, LinkedIn 2 Jun 2025 305 Redmond, Washington HQ roles; additional WARN-notice layoffs following the May cuts 2 Jul 2025 ≈9,000 (Microsoft says "< 4% of staff") Company-wide; Xbox, sales, management layers, and other divisions 23 Apr 2026 (opens May) Up to ≈8,750 offered voluntary exit US employees at senior director level and below whose age plus tenure equals 70 or higher; certain sales staff excluded
The Xbox CEO revealed that, excluding Activision, Microsoft's gaming division has spent more than $20 billion in the past five years on acquisitions and hardware subsidies. During the same time period, annual revenue has fallen by almost $500 million, and the company expects to end the fiscal year with a 3% decline in profit margins.
Bloomberg expects Microsoft to announce the job cuts shortly after its fiscal year ends on June 30. Although the scale of the upcoming layoffs remains unclear, Giant Bomb recently claimed that about 1,000 employees might be affected, which would bring Microsoft's total since 2023 to around 40,000.
Sharma also outlined the supply challenges the company has faced since the buildout of AI data centers has sent digital storage prices skyrocketing. When the new CEO took over in February, Microsoft was paying twice as much for Xbox storage as last fall, and prices have since doubled again. Sharma expects prices to have risen by a factor of five between Fall 2025 and the 2027 holiday season, suggesting that this remains the company's desired release window for the next Xbox console, codenamed Helix.
Rumors based on leaked chip design documents have always suggested that Helix would be expensive owing to its robust hardware. However, the RAM crisis, partially driven by Microsoft's investments in AI, is expected to push console prices into uncharted territory. In the memo, Sharma stated that Microsoft plans to "reset" the Xbox business, and in an earlier interview with Fortune (above), she explained that Xbox is exploring new business models to reach more prospective customers.
"I think we've reached a point where it will be hard to imagine that mass audiences can afford thousands of dollars to spend on a console generation," the Xbox CEO told the outlet. "And so I think we will start to see radically different business models that we never expected start to come into orbit later this year." Despite flagging sales, Sharma also confirmed that Xbox Series consoles are currently supply-constrained.
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