Key insights
- Microsoft's Xbox division is reportedly planning significant layoffs next month, as new CEO Asha Sharma aims to reset the business. Sharma cited the division's unhealthy financial state, declining revenue despite substantial investment, and increased memory costs. This news, coupled with a broader tech pullback, contributed to a 3% drop in Microsoft shares, suggesting potential headwinds for the company and its sector.
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Microsoft's Xbox division could soon face a shakeup of its workforce under new CEO Asha Sharma.
The console and video game maker is planning to undergo a "major" round of layoffs, that could be announced as soon as next month, Bloomberg reported Wednesday.1 Sharma is also considering other changes that could include increasing Xbox's focus on making games exclusive to its consoles and cutting marketing spending, the report said.
Sharma, who took over the top job of the gaming division in February, said at a conference that the Xbox division was "not in a healthy spot" and needs a reset.2 Xbox has spent some $20 billion on investments in Xbox hardware and software over the last five years, and in the same period its annual revenue has declined by nearly $500 million, Sharma said in a message to Xbox employees.3
Microsoft and Xbox did not respond to Investopedia requests for comment in time for publication.
The move could point to the start of a broader transformation under Sharma's leadership.
Sharma said Xbox is facing the same soaring memory costs that are leading to higher prices in other hardware categories, but said the company has been "impacted more greatly than many of our peers due to the choices we made over the last half decade."
Microsoft has spent the last several years making big investments in acquiring studios to attempt to boost Xbox sales to catch up to rival Sony's PlayStation 5. It has also undergone several rounds of layoffs, shuttered some studios, and canceled games as it looked to improve its margins.
"We won’t succeed by hiding hard truths, nor will we succeed by doing the same thing and expecting different results," Sharma wrote.
Microsoft shares were down about 3% in recent trading, amid a broader pullback in tech shares.
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