The Xbox division at Microsoft is reportedly facing turbulent times, challenged by layoffs and financial targets that insiders claim could jeopardize its long-term health. According to reports, there’s mounting pressure from higher-ups that has led to “unrealistic” financial goals, hindering the division’s progress.
Jez Corden shared insights on X, indicating that Microsoft’s CFO, Amy Hood, set financial expectations for Xbox that are too ambitious. He mentioned that these goals could continue to “hurt the division.” This revelation comes alongside significant layoffs at Microsoft, impacting Xbox and its associated studios.
Tom Warren added his perspective, suggesting the targets aren’t necessarily unrealistic but reflect the current state of Xbox’s business following the massive $68.7 billion purchase of Activision Blizzard. This acquisition expanded Microsoft’s portfolio with popular titles like World of Warcraft, Diablo, DOOM, and Call of Duty.
To understand the bigger picture, consider Microsoft’s total revenue was $198.27 billion for the fiscal year 2022, with Xbox contributing just $16.23 billion. In 2024, Xbox revenue dropped to $15.7 billion from the previous year’s $21.5 billion. Insiders attribute this decline to weaker Xbox hardware sales, with Microsoft selling only 2.7 million units compared to Sony’s 4 million PS5 units.
Xbox Game Pass reached 34 million subscribers in early 2024, and by mid-2025, it’s reported to have over 35 million subscribers. However, this falls short of Microsoft’s ambitious goal of 100 million users by 2030. Even though Game Pass generated $4.7 billion in revenue in 2024, with projections of $5.5 billion by 2025, it’s not enough to counterbalance Microsoft’s substantial financial investments.
The financial strain has been significant, prompting Microsoft to lay off 9,100 employees, affecting key studios like Turn 10, Rare, Romero Games, and The Initiative. As Xbox Game Studios undergoes a vigorous restructuring, the path forward appears challenging. The impact of these layoffs has rippled through the gaming industry, with affected employees sharing their unexpected job losses on LinkedIn.
