Xbox Heads Toward Major Layoffs as Asha Sharma Moves to 'Reset the Business'

Microsoft's Xbox division is reportedly preparing for another round of major layoffs, the first under new CEO Asha Sharma, according to a report from Bloomberg's Jason Schreier. The cuts are expected to land after Microsoft closes its fiscal year on June 30, and they arrive alongside what sources describe as a significant reduction in Xbox marketing spend and trims in other areas.

What's happening

Schreier, citing people familiar with Microsoft's strategy, says the exact scale of the layoffs remains unclear. What seems settled is the timing and the direction. The end of the fiscal year is the trigger, and the marketing budget is a confirmed target. For a division that has leaned heavily on Game Pass promotion, hardware launches, and first-party studio campaigns, a "significant" marketing cut is a meaningful pullback rather than routine trimming.

The move follows Sharma's recent Bloomberg Tech interview, where she was unusually direct about the state of the business. She acknowledged that Xbox is not in a healthy spot and that changes would have to come, though she stopped short of describing any specific restructuring at the time. The Bloomberg report fills in some of that gap by quoting an internal email she sent to employees. In it, she wrote that "our annual revenue has declined nearly half a billion during that time," referring to the past five years, and added, "Going forward, this cannot continue."

That figure is the part worth sitting with. A roughly $500 million revenue decline over five years is not a collapse, but for a division inside a company posting record overall earnings, it stands out as the unit that is shrinking while the rest of Microsoft expands. The email reportedly also pointed to areas of growth over that same period and stressed that making the right investments from here is what matters most.

How it compares

This is not Xbox's first contraction. The division has absorbed multiple waves of cuts over the past two years, including studio closures and reorganizations that followed the Activision Blizzard acquisition. What makes this round different is leadership. Sharma is the new CEO, and a first major layoff under a new chief usually signals a reset of priorities rather than a one-off correction. Executives tend to use their opening months to redraw the budget around what they intend to fund long term, which means the deprioritized areas this time may tell you more about Xbox's future shape than the headcount number itself.

The broader gaming industry context is harsh. The news lands shortly after Ubisoft's own shakeup, which included the closure of two more studios and layoffs affecting around 380 employees across another team. Across the sector, publishers are cutting marketing, consolidating studios, and pulling back on the kind of speculative spending that defined the post-pandemic boom. Xbox is not an outlier here. It is moving with the rest of an industry that overhired and overspent against demand that has since flattened.

Who it's for

For players, the practical question is what gets deprioritized, and that remains unanswered. A marketing cut alone does not change what ships, but layoffs paired with budget reductions across "some other areas" raise the usual concerns about release cadence, studio support, and the long-term hardware roadmap. Microsoft has spent the past year repositioning Xbox as a platform and service rather than a box, with games appearing on rival hardware and a stronger push toward Game Pass as the center of the business. A leaner, service-first Xbox is consistent with that direction, and this restructuring reads as Sharma aligning the cost structure to it.

Nothing here is final until Microsoft confirms specifics after June 30, and the company has not commented publicly on the scale. For anyone watching Xbox as a hardware and platform business, the signal to track is not the layoff count but where the surviving investment goes. Sharma's own framing, that the right investments going forward are crucial, suggests the reset is about concentrating resources rather than simply spending less. The numbers and the named cuts in the coming weeks will show which bets she has decided are worth keeping. You can read the original reporting at Bloomberg and follow-up coverage at Insider Gaming.