Microsoft Layoffs: Xbox CEO Asha Sharma acknowledges ‘business is not healthy’, flags weak margins amid 3200 job cuts
Microsoft Corp.’s gaming division Xbox is preparing to lay off about 3,200 people next year, or about a fifth of its workforce, as part of a sweeping restructuring aimed at revitalizing the business. The restructuring will also include the sale of four video game development studios, and the company has begun the process of exiting a fifth studio.
Xbox Chief Executive Asha Sharma, who announced the overhaul in a message to employees on Monday, acknowledged the challenges facing the division. “Our business is not healthy today,” he wrote, adding that Xbox’s profit margins are three to ten times lower than similar businesses. “We need to reset the Xbox.”
According to the notice, 1,600 employees will be laid off on Monday, and the remaining layoffs will take place over the next 12 months.
What did Xbox CEO say?
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He noted: “As this happened, our core business weakened, and we added more teams, more investment, and more time in the hopes of achieving a better outcome. And now the industry is facing the most serious hardware crisis in its history. We need to reset XBOX.”
The move comes alongside another 3,200 layoffs across Microsoft’s non-Xbox businesses, primarily affecting sales teams. In a separate note reviewed by BloombergDirector of Human Resources Amy Coleman said the workforce reductions are due to changes in product development and evolving customer demand.
In his note to employees, Sharma said the restructuring was aimed at simplifying Xbox’s operations and redirecting resources to larger projects. The move marks his most significant decision since taking over as Xbox CEO in February, taking over what he has previously described as a business facing serious challenges.
Despite major investments, including Microsoft’s $69 billion acquisition of Activision Blizzard in 2023, its gaming division has struggled to produce blockbuster games, suffered a sharp decline in hardware sales and operated in an increasingly difficult market.
In a memo sent to employees last month, Sharma explained that Xbox’s “margin of responsibility,” Microsoft’s internal measure of profit margin, had fallen to 3%, with annual revenue also falling significantly. “This cannot continue going forward,” he said.
Sharma said he wants Xbox to be one of the few companies that gives everyone the opportunity to create and connect while entertaining more than a billion people every day. He expressed confidence in the company’s future, noting that Xbox has some of the entertainment industry’s most iconic franchises and a network of talented studios around the world, adding that he expects the business to return to growth in 2027.
“History is full of companies that have confused longevity with inevitability. We will not be one of them,” he said.
Microsoft shares were down 1.7% at 9:55 a.m. in New York.
