In July, Xbox may be the next company hit with major changes to its workforce.
According to Bloomberg, people familiar with Xbox’s strategy said that the company is “planning major job cuts next month,” although the scale and details of the cuts are still unclear. Along with staff cuts, Xbox is also planning “significant” budget cuts “for marketing and some other areas of the business.”
Fast Company reached out to Xbox for comment regarding details about the layoffs and budget cuts.
This would mark Asha Sharma’s first round of layoffs since she joined the company as CEO in February. Since the former Instacart COO and Microsoft CoreAI president took on the role of CEO, she has made some major changes, like removing Microsoft’s Copilot AI from gaming consoles and lowering prices of Xbox Game Pass. (Enthusiastic Xbox devotees created memes of Sharma depicted as Jesus Christ after these changes.)
Sharma has been candid about Xbox’s struggles. During a panel at the Bloomberg Tech conference earlier this month, she spoke about the company’s challenges and plans for “resetting the business,” which was “not in a healthy spot.”
“The gaming industry is going through a hard time,” Sharma said, attributing some of the struggle to AI. “With AI, memory and storage costs are going up, 2.75 times rather than 50% down. Just in my first 100 days, it’s up 50% and I think it will continue to go up. The biggest challenge and opportunity is: how do you make affordable products during that time?”
Just today, the head of Xbox Game Studios Craig Duncan stepped down from his role after joining the team in November 2024. The company’s chief of staff Louise O’Connor will also be departing.
Last week, Sharma outlined the challenges facing the company and her priorities to “reset for a stronger Xbox” in a blog post.
“We will end this fiscal year at about a 3% accountability margin, down year-over-year,” Sharma wrote. “Excluding Activision Blizzard King, over the past five years, we have spent over $20 billion on ongoing investments in our content, platform, and hardware subsidy, but our annual revenue has declined nearly half a billion during that time. Going forward, this cannot continue.”
Sharma also wrote that Xbox’s current platform infrastructure is “overly complex” and “not built for the battle ahead.” She added that Xbox has “become too reliant on vendors to operate our systems.”
Sharma also said Xbox has been unable to make as many consoles as players want to buy because of a “hardware component crisis.”
“When I joined as CEO in February, the price we paid for console storage components was over two times as high as we paid last fall,” Sharma wrote. “These costs have since doubled again. And as we plan for the 2027 holiday season, we expect another significant increase, taking us over five times the prices we paid only two years earlier.”
“While the entire industry is facing a components crisis, we believe we have been impacted more greatly than many of our peers due to the choices we made over the last half decade,” she added.
In March, Microsoft CEO Satya Nadella said the company will continue to invest in gaming.
“For me, we’re long on gaming,” Nadella said at an internal Microsoft Q&A. “We’ll continue to invest, and we’ll always do so. It’s up to this team to show excellence in execution and in creativity. Software always carries risk, but this is software with lots of creation risk. It’s way different. But yet, we have to be the best in class at it.”
In order to course correct and survive, it seems like Xbox will have to join the ranks of companies that have issued mass layoffs in recent months.