Report: Xbox Planning Major Layoffs as New CEO Asha Sharma Unveils ‘Xbox Reset’ Strategy

Following years of workforce reductions aimed at streamlining corporate finances, Microsoft is reportedly bracing for a new wave of “significant layoffs” within its Xbox division. This initiative serves as a core component of the “Xbox Reset,” a strategic overhaul spearheaded by new CEO Asha Sharma. According to reports from Bloomberg, this shift marks a definitive departure from previous operational norms.

The internal directive, shared with staff via an Xbox Wire blog post authored by Sharma and Xbox chief content officer Matt Booty, outlines a stark reality: the current trajectory is unsustainable. While the communication stops short of explicitly confirming layoffs, it aligns precisely with reports of impending staff cuts and substantial budget reductions for marketing and secondary business units.

The company’s financial health has been a point of concern; internal data reveals a shrinking profit margin—retained at roughly 3%—compounded by nearly half a billion dollars in annual revenue loss. Despite pouring $20 billion into platform development, hardware, and content, Sharma and Booty were blunt in their assessment: “Going forward, this cannot continue.”

The leadership team acknowledged that the company overextended itself during a period of rapid studio acquisitions. They noted that while they hold stewardship over industry-defining franchises, these titles have lacked the necessary funding to truly dominate the market. Furthermore, the company is pivoting back toward a focus on exclusives and dedicated hardware, distancing itself from the broader, platform-agnostic “This is an Xbox” messaging that dominated recent years. The Verge suggests these fiscal tightening measures could extend to the shuttering of specific game studios.

Hardware remains a central concern, with component costs—particularly for console storage—skyrocketing to five times their price from two years ago. To address this, Microsoft is seeking a revamped business model and new hardware partnerships as it pushes forward with its “Project Helix” initiative. Leadership conceded that current platform infrastructure is overly complex and fragile, lacking the efficiency required for future competitiveness.

“Now we start the next 100 days. It is important to have both optimism and realism as we work to reset the business,” the announcement concluded. Addressing staff, Sharma and Booty emphasized that hiding from difficult truths will not lead to success, promising a rapid, unified sprint to revitalize hardware, service experiences, and content pipelines.

This news follows a high-profile Summer Games Showcase, which spotlighted upcoming console-exclusive titles such as Gears of War: E-Day and Clockwork Revolution, alongside multi-platform projects like Fable, which is slated for release on both Xbox and PlayStation 5.

Sources: Bloomberg, The Verge