Microsoft Plans New Wave of Xbox Layoffs in July

The information comes from an internal memo titled "Next 100 Days: Xbox Reset," which Bloomberg was able to review through people familiar with the plans. It was written by Asha Sharma and Chief Content Officer Matt Booty. The memo states that Xbox overextended itself in expanding its own studios while simultaneously failing to adequately fund its major brands in order to remain competitive. Sharma and Booty write verbatim: "So kann es künftig nicht weitergehen".

Memory Crisis as a Central Cost Driver

The memo lists five "realities" the division must confront. According to the memo, the Xbox division will only achieve a margin of around 3 percent in the current fiscal year, down from the previous year. Annual revenue declined by just under half a billion US dollars over the same period. Excluding the Activision Blizzard King acquisition, Microsoft has invested more than 20 billion US dollars in content, platform, and hardware subsidies over the past five years.

A central problem, according to the internal document, is the ongoing memory crisis. The prices of the memory chips used in the consoles have reportedly doubled again since Sharma took office in February, after already being more than twice as high as in fall 2024. For the 2027 holiday season, Xbox expects prices to be more than five times the level of two years ago. Microsoft sees itself as more affected by this crisis than many competitors. Currently, Xbox cannot build as many consoles as players want to buy.

Cuts to Marketing and Investment

In addition to the layoffs, Xbox is reportedly planning significant cuts to its marketing budget and in other, unspecified business areas. Investment priorities for the next five years are to be reviewed. For the hardware business, Xbox also needs a new business model and new partnerships. Additionally, Xbox wants to restructure its platform infrastructure and is not ruling out acquisitions for this purpose.

Meanwhile, Microsoft has published a slightly different memo titled "Next 100 Days: Xbox Reset" on Xbox Wire. There is no mention of layoffs in that document. According to the memo, Microsoft intends to stick with the next console generation, which is being developed under the codename Project Helix. The memo was published just a few days after the Xbox Games Showcase, which Sharma oversaw for the first time as Xbox chief. There, Microsoft announced two more exclusive titles with "Gears of War: E-Day" and "Clockwork Revolution."

Reactions and Open Questions

The planned job cuts are also being picked up by other media outlets. The Verge is also reporting on the "Xbox Reset," citing insiders. The Giant Bomb podcast had previously also reported on internal documents. PC Gamer articulates criticism in a commentary: "Die Entwickler der Xbox-Studios, die Sharma voraussichtlich zum Start des Fiskaljahres im Juli entlassen wird, werden das Lob sicher zu schätzen wissen, dass sie branchenprägende Franchises mit enormem Potenzial geschaffen haben – auch wenn der Publisher nicht angemessen in sie investiert hat". PC Gamer also points out that Microsoft as a whole generated 32 billion US dollars in profit in the past fiscal year, with the Xbox division contributing only three percent of that.

Microsoft has not commented on the report. In recent months, Asha Sharma had already abandoned the "Microsoft Gaming" brand, discontinued the "Gaming Copilot" service, and lowered Game Pass prices. She also distributed limited-edition Xbox Series X consoles to fans at the summer showcase in Los Angeles. The Xbox studio closures and marketing cuts are, according to The Verge, explicitly tied to a "hardware crisis." The memo projects that internal costs per console will rise by a factor of five by the 2027 holiday season compared to 2024.

The news fits into a series of layoffs at Microsoft over the past years. Industry observers see this as a sign that the company wants to orient its gaming division more strongly toward profitability, while competitive pressure from Sony, Nintendo, and the growing cloud gaming market is simultaneously increasing. Which studios and areas will be exactly affected remained unclear initially.

Players and developers responded with concern in online forums and social networks. Many fear that long-established studios could be closed and popular brands neglected. Xbox, meanwhile, pointed to the announced exclusive titles and emphasized its commitment to the next console generation.