Microsoft Reportedly Pushes Xbox Division to Hit Massive 30% Profit Margins

Microsoft has reportedly asked its Xbox division to achieve 30% profit margins. The news comes via Bloomberg, which reported that this decision has already led to canceled projects, widespread layoffs, and strategic shifts across the gaming business.

Per the report, the company’s Chief Financial Officer (CFO), Amy Hood, introduced the new “accountability margin” policy over the last two years. According to people familiar with the matter, Xbox studios are now expected to align production budgets and creative priorities around this 30% benchmark.

For the uninitiated, that’s a figure that far exceeds the industry’s average of 17%–22%. Looking back at the trend, Xbox’s profit margins have been somewhere around 10% to 20%, and court filings from 2023 revealed that the division posted a modest 12% margin for the first nine months of fiscal 2022.

Even analysts say the new number is at the upper limit of what’s achievable even for top publishers. “A 30% or better margin is usually reserved for a publisher that is really nailing it,” said Neil Barbour of S&P Global.

Xbox has reportedly cut thousands of jobs and scrapped long-running titles like Everwild, Perfect Dark, and Project Blackbird, each in development for over seven years. At the same time, the division has increased game prices and shifted more titles to rival platforms, including PlayStation and Nintendo.

The restructuring suggests a fundamental shift in Microsoft’s gaming strategy. Under Phil Spencer’s leadership, the company had previously prioritized creative freedom and ecosystem growth over raw profitability. That approach now appears to be giving way to a stricter financial model.

That’s not all; Xbox’s recent acquisitions, including Activision Blizzard and ZeniMax Media, were intended to bolster its first-party catalog. However, they’ve also intensified scrutiny from Microsoft’s leadership as the company doubles down on its AI investments.

An Xbox spokesperson told Bloomberg that the company continues to take a long-term view of its business and balances “creativity, innovation, and sustainability” across its portfolio. What do you think of this move by Microsoft? Do let us know in the comments below.