As the summer gaming festivities come to a close, it’s a perfect time for reflection. Not only on the amazing games we announced (and there were a lot of them), but also on an industry that, in recent years, has experienced both frustrating declines in the form of layoffs, cancellations, and studio closings, as well as thrilling new creative and artistic highs. Xbox is putting its introspection out in the open.
New CEO Asha Sharma and Chief Content Officer Matt Booty wrote a public memo to the gaming company’s employees to mark the first 100 days of Sharma’s tenure as head of Xbox. The takeaways are pretty serious.
For starters, the simple math of Xbox’s revenue isn’t adding up to success. “Excluding Activision Blizzard King, over the past five years, we have spent more than $20 billion on ongoing investments in our content, platforms, and hardware subsidies, but our annual revenue has declined by nearly half a billion during that time,” the executive says. “Moving forward, this cannot continue.” They also acknowledge the impact of RAMaggedon: “We are currently unable to produce as many consoles as players want to buy, and we need a new business model and partnerships for hardware as we remain committed to Helix.” (Helix, in this case, is Project Helix, the codename for Xbox’s new console.)
Then there’s the kicker, a renewed admission that Xbox still can’t support many of the studios it acquired in the late 2010s in an effort to increase its first-party game ambitions. “We’ve found ourselves overextended as we execute on changing strategies in a more readily available content landscape,” the pair said, noting elsewhere that with so many great games out there, not to mention an abundance of other forms of entertainment, “moving forward, our competition deserves attention.”
While the memo avoids saying that layoffs are coming, a report bloomberg Emphasizing the possibility of what is being communicated between the lines. Sources have told the publication that substantial cuts are on the way for Xbox. Although the piece doesn’t provide any details about their scope, the layoffs are expected to begin in July, following the end of Microsoft’s fiscal year on June 30.
It’s a brutal situation for Xbox, which has already seen several thousand jobs eliminated in 2024 and again in 2025. And even if the company has to downsize once again and stop promising new games this summer, it still won’t be an immediate solution to its problems. It took years of questionable decisions to dig the hole Xbox is currently in. It will take many years with a patient and sustainable approach, and probably no small amount of luck, for the business to dig itself out. It doesn’t matter to Sharma or his predecessor Phil Spencer. It’s the nature of being a cog in a giant business machine like Microsoft, where the goals of creating amazing video games and video game hardware often don’t align with the goal of pleasing investors and shareholders.
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