Xbox braces for layoffs, warns of company ‘reset’
▼ Summary
– Microsoft’s Xbox division will undergo significant layoffs next month, potentially including a studio closure or changes to the studio lineup, with rumors suggesting up to 1,000 cuts.
– Xbox CEO Asha Sharma and chief content officer Matt Booty warned of an “Xbox reset” in a memo, citing a $20 billion investment over five years while annual revenue declined by nearly half a billion dollars.
– The company faces a “hardware component crisis,” with costs for the 2027 holiday season expected to exceed five times the prices from two years earlier.
– Sharma and Booty indicated a need for new business models and hardware partnerships, possibly allowing PC OEMs to create Xbox-branded devices using AMD chips.
– The memo stated that Xbox’s current platform infrastructure is insufficient, requiring a rebuild of the stack and potential M&A to compete in hardware, PC, mobile, and streaming.
Microsoft’s Xbox division is bracing for significant job cuts next month, according to sources familiar with the company’s internal planning. The layoffs have been in the works for weeks, and Xbox CEO Asha Sharma recently hinted at “making hard choices” during a staff address. Insiders suggest the restructuring could go beyond headcount reductions, potentially involving a studio closure or changes to the Xbox studio lineup. Rumors of roughly 1,000 layoffs surfaced during a recent episode of Giant Bomb, while Bloomberg today described the cuts as “major” and noted they would also affect marketing and other business areas.
Just before Bloomberg’s report broke, Sharma and chief content officer Matt Booty sent a memo to Xbox employees, warning of an “Xbox reset” over the next 100 days. The memo pointed to steep challenges. “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,” they wrote. “Going forward, this cannot continue.”
The executives also highlighted a hardware component crisis, stating that component costs for the 2027 holiday season are expected to be “over 5x the prices we paid only two years earlier. Memory costs have followed a broadly similar trajectory.” They added that “we need a new business model and partnerships for hardware as we remain committed to Helix.”
Sharma and Xbox strategy chief Matthew Ball have been hinting at “radically different” console business models this week. The mention of hardware partnerships fuels speculation that other PC OEMs could eventually build Xbox-branded devices using AMD’s next-generation chips.
Still, the current platform infrastructure “is not built for the battle ahead,” Sharma and Booty wrote. “We’ll evolve and rebuild our stack and look at capabilities across all of XBOX and potential M&A to help us win in hardware, PC, mobile, and streaming.”
Since taking over, Sharma has already made bold calls, including locking Gears of War: E-Day and Clockwork Revolution as Xbox console exclusives.
(Source: The Verge)
