The state of Xbox is currently precarious. Following the announcement of 3,200 upcoming job cuts, industry observers are scrutinizing the company’s recent performance. In a candid internal memo, Xbox CEO Asha Sharma explicitly identified a primary catalyst for the downsizing: the stagnation of Game Pass, noting that the subscription service “did not grow at the pace we expected.”
According to a recent report from The Wall Street Journal, the platform currently sustains approximately 30 million subscribers. This figure is significantly lower than the 77 million target projected in documents surfaced during the Federal Trade Commission’s review of the Activision Blizzard acquisition.
During the regulatory hearings, former Xbox lead Phil Spencer acknowledged these ambitious forecasts. He notably suggested that if Game Pass failed to see substantial growth—particularly regarding non-console users—by the start of the 2027 fiscal year, the company would be forced to reevaluate its involvement in the gaming sector entirely. With Microsoft’s 2027 fiscal year now underway as of July 1, 2026, the current subscriber count falls well short of those critical benchmarks.
“I do not believe that is what the future of the Xbox business would look like. This is a internal presentation… regarding the future of our business. I can fairly safely say that if we do not make more progress than this outside of the console space, we would exit the gaming business. If this were the final outcome, I don’t believe we would remain in this market.”
While some argue that Spencer’s testimony was designed to emphasize the necessity of the Activision Blizzard merger to skeptical regulators, Sharma’s recent admission confirms that Game Pass has fundamentally failed to meet its growth mandates.
Anticipate a major transformation for the Xbox Game Pass model
Third-party developers report that current negotiations with Xbox have been placed on indefinite hold.
The last official update regarding subscriber counts arrived in February 2024, when Microsoft boasted 34 million users. However, Xbox chief strategy officer Matthew Ball indicated that the platform suffered a significant churn of millions of players following price hikes in October 2025. It appears the service has yet to recover to those previous highs, which likely explains Microsoft’s decision to withhold specific data in recent quarters.
Although Sharma noted in June that the service has finally “started to grow again” after an eight-month decline, Microsoft’s subscription strategy remains a long way from achieving the ambitious scale envisioned by its executive leadership.
Source: Polygon
