Microsoft’s Xbox division could be preparing for a major round of layoffs as the company approaches the end of its fiscal year, according to new insider claims. The reported cuts would mark one of the first major workforce shakeups under Xbox CEO Asha Sharma’s leadership and could signal a broader shift in Microsoft’s gaming strategy.
According to information shared by Bloomberg reporter Jason Schreier, people familiar with Microsoft’s internal plans say the Xbox business is expected to face significant job reductions after the company’s fiscal year closes on June 30. While the exact number of affected employees has not been confirmed, the report suggests the layoffs could be substantial.
The potential job cuts may not be limited to staffing alone. Xbox is also reportedly preparing to reduce its marketing budget significantly, with additional cuts expected in other areas of the business. If accurate, these changes could reshape how Microsoft promotes Xbox hardware, Game Pass, first-party games, and future gaming initiatives.
The timing is notable. Asha Sharma recently appeared in a Bloomberg Tech interview where she spoke openly about the challenges facing the Xbox business. While she did not announce restructuring plans during the interview, she acknowledged that Xbox was not in the position it needed to be and that changes would be necessary to improve long-term performance.
An internal email reportedly sent by Sharma to employees also pointed to financial pressure inside the division. In the message, she allegedly stated that Xbox’s annual revenue had declined by nearly half a billion dollars over the past five years, adding that this trend “cannot continue.” The email reportedly emphasized the importance of making smarter investments as the business moves forward.
For Microsoft, the Xbox division has become an increasingly complex part of its broader entertainment and technology strategy. The company has invested heavily in gaming over the years, including studio acquisitions, cloud gaming, subscription services, and major releases designed to strengthen the Xbox ecosystem. However, rising costs, shifting consumer habits, and slower revenue growth appear to be forcing a closer look at where money is being spent.
The reported layoffs also arrive during a difficult period for the wider video game industry. Many major publishers and studios have reduced staff, canceled projects, or closed development teams in recent years as companies adjust to changing market conditions. Ubisoft recently underwent a major shakeup of its own, including studio closures and layoffs affecting hundreds of workers.
At this stage, Microsoft has not publicly confirmed the scale or details of the reported Xbox layoffs. It also remains unclear which teams, projects, or departments could be most affected. However, if the reports prove accurate, the coming weeks may bring one of the most important turning points for Xbox in recent memory.
The key question now is what Microsoft wants Xbox to become in the years ahead. With revenue pressure mounting and leadership calling for more disciplined investments, the company may be preparing to refocus its gaming business around the areas it believes can deliver the strongest growth. For employees, developers, and players, that strategy could have major consequences across the Xbox brand.
