Days after its gaming showcase, Xbox is reportedly slashing budgets and preparing to lay off a “significant” number of staff, as part of new CEO Asha Sharma’s business “reset” for the Xbox brand.
Via a new article from Jason Schreier at Bloomberg, the first of these cuts will come in July, soon after the conclusion of the company’s fiscal year. According to his sources, Xbox is also planning major cuts to marketing budgets as well as other areas of the business. This comes after Sharma has spoken publicly about the financial challenges facing Xbox, saying it was not in “a healthy spot”.
Eurogamer has also heard from multiple sources that layoffs at Xbox are imminent, and has contacted the company for comment.
A letter first sent to employees internally at Xbox, then later published on the Xbox Wire news website, is signed by Sharma and chief content officer Matt Booty and titled “Next 100 Days: Xbox Reset”. It breaks down the performance of the company, revealing it had a three percent “accountability margin” this fiscal year, and that annual revenue had decreased nearly half a billion dollars.
For reference, accountability margin is lingo used by Microsoft to refer to profit margin. The company is reportedly looking to reach a 30 percent margin business-wide, and while Sharma herself has pushed against that exact figure for Xbox’s targets, it portrays how poorly things have been going for Xbox as of late.
Back to the Xbox reset letter, Sharma and Booty also addressed the current component crisis caused by the rise of the generative AI industry. Sharma wrote that when she joined as CEO in February, the cost of this hardware was twice as much as it was last autumn. For the autumn 2027 season, she expects another “significant” increase, “taking us over 5x the prices we paid only two years earlier”.
It is no secret Xbox has been struggling. Console sales have taken a nosedive, hitting the worst year on record in the UK for the company. Only a few days ago, Xbox’s chief strategy officer revealed the company lost millions of Game Pass subscribers as a result of a recent price hike.
Sharma, for better or worse, appears to be prepared to make wide-reaching changes in order to turn the ship around. A push towards greater console exclusivity is a part of this, with Gears of War: E-Day and Clockwork Revolution staying clear of the PS5. In the Xbox reset post, she noted her intent to rebuild the platform infrastructure and content pipeline, while focusing on its “beloved” franchises.
Sharma and Booty concluded by writing that these changes may be “surprising” and even “frustrating” for some staff.
Eurogamer wishes any who may be impacted by the potential layoffs the very best for the future.
