XBOX Reportedly Planning Major Layoffs in July Amid Mounting Costs

Bloomberg reports Xbox may hold major layoffs in July as Asha Sharma pushes a business reset and reviews spending. Just days after Xbox delivered one of its most talked-about showcases in years, a very different story is starting to take shape behind the scenes.

According to a new report from Bloomberg’s Jason Schreier, Microsoft is preparing another round of layoffs within Xbox, with cuts reportedly expected sometime in July following the end of the company’s fiscal year. Bloomberg also reports that marketing budgets and other areas of the business could face significant reductions.

Asha Sharma says XBOX Must change course

The reported plans arrive as Xbox CEO Asha Sharma continues outlining her vision for the platform’s future. In an internal memo obtained by Bloomberg (now publicly available), Sharma reportedly revealed that Xbox’s “accountability margin” had fallen to just 3%, a metric used internally to reflect overall profitability.

The memo also included a stark assessment of Xbox’s recent performance.

“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.”

According to Bloomberg, Sharma argued that the current trajectory is unsustainable and that Xbox needs to rethink how it operates moving forward.

Showcase success doesn’t erase bigger challenges

What’s particularly notable is the timing.
Xbox is coming off a Showcase packed with major announcements, including exclusive projects like Gears of War: E-Day and Clockwork Evolution. Those reveals were widely viewed as part of Xbox’s effort to strengthen the value of its own platform. Sharma reportedly addressed that balancing act directly in the memo:

“We expanded our studio system when we needed a pipeline of content to meet multiple strategies across subscription, streaming and devices.”

“In the process, we have found ourselves over extended as we executed on changing strategies in a landscape of more readily available content. We are the fortunate stewards of industry-defining franchises that have enormous potential and player demand, but we have not adequately funded them to compete and win. At the same time, as we saw this past weekend at Showcase, a reliable pipeline of first- and third-party exclusives and new IP are critical to our success. We need to reassess the balance between these and our investment priorities for the next 5 years.”

As of now, Microsoft has not publicly confirmed the scope of any potential layoffs. However, if Bloomberg’s reporting proves accurate, Xbox’s ongoing transformation may soon involve difficult decisions alongside its newly announced games.