'Xbox isn't healthy': CEO's blunt message after 3,200 layoffs
What's the story
Asha Sharma, the CEO of Xbox, has announced a major restructuring of the company. In an email to employees, she revealed that around 3,200 jobs will be cut over the next fiscal year. This accounts for nearly 20% of Xbox's total workforce. The decision comes as part of Microsoft's broader AI-led job cuts strategy.
Layoff strategy
Layoffs to be immediate and phased
Microsoft is laying off 4,800 employees company-wide effective immediately. This initial wave includes 1,600 cuts from its Xbox division. However, Xbox faces a total of 3,200 reductions through fiscal year 2027; the remaining 1,600 Xbox employees will be phased out later in the fiscal year. The restructuring also involves Xbox divesting four gaming studios and preparing to part ways with another one.
Official words
'We must reset Xbox'
"Our business today is not healthy. We are operating at margins that are 3-10x lower than comparable platform and publishing businesses," Sharma said. She added that Xbox started this generation with fewer users and higher costs, betting on Game Pass, multi-platform releases, and more content to drive growth. While these areas grew, they were too slow to offset a weakening core business. "And now the industry is facing the most severe hardware crisis in its history. We must reset Xbox."
Business health
Xbox has been losing money for past year
Sharma admitted that Xbox has been losing $0.64 for every dollar invested in a year. To turn things around, Sharma said Xbox will focus on helping independent creators succeed by providing open development tools and audiences. The company also plans to cut vendor spending by 50% as part of its recovery plan.
Leadership shift
Sharma also announced plans to streamline operations at Xbox
Sharma also said the company will reduce management layers to no more than five, and where possible, three. This is aimed at speeding up decision-making processes within the company. "For the first time, we are establishing a Chief Operating Officer with end-to-end P&L responsibility across content, hardware, platform, and services. Helen Chiang has been promoted to this role and will report directly to me," Sharma wrote in her post. Chiang has been with Xbox for nearly two decades.
Twitter Post
Take a look at Sharma's post
This is an important email I sent today to all employees at XBOX:
— ASHA (@asha_shar) July 6, 2026
Team,
We are beginning the most significant restructure in XBOX history. After careful consideration, I've made the difficult decision to reduce our team by approximately 3,200 throughout FY27. This will include…