Microsoft’s Xbox division is preparing for significant layoffs next month as leadership initiates a 100-day “reset” to address stagnant revenue and rising hardware costs. According to reports from Bloomberg and internal memos reviewed by The Verge, the company plans to reduce headcount and trim marketing budgets to combat a half-billion-dollar decline in annual revenue over the last five years, excluding Activision Blizzard King.
Why is Microsoft initiating an Xbox reset?
Microsoft leadership, including Xbox CEO Asha Sharma and chief content officer Matt Booty, cited a failure to convert $20 billion in content and hardware investments into revenue growth. In a memo to staff dated June 10, 2026, the executives stated that the current business model is unsustainable. The company reported that while it invested heavily in platform and hardware subsidies, annual revenue dropped by nearly $500 million during the same five-year period.

Did you know?
Microsoft’s internal memos indicate that hardware component costs for the 2027 holiday season are projected to be five times higher than prices paid just two years prior.
How will hardware strategy change?
The company is moving away from its traditional console-only focus due to a “hardware component crisis.” Sharma and Booty confirmed that memory and component costs have surged, necessitating a new approach to hardware partnerships. Strategy chief Matthew Ball has hinted at “radically different” models, which industry observers suggest may involve licensing the Xbox brand to third-party PC manufacturers using AMD chips, similar to the Windows ecosystem.
- Current status: Commitment to the "Helix" project remains, but the platform infrastructure is undergoing a rebuild.
- Future outlook: Microsoft plans to leverage potential mergers and acquisitions to strengthen its position in mobile, PC, and cloud streaming.
What do the layoffs mean for Xbox studios?
While official details on specific studio closures remain unconfirmed, Bloomberg reports the cuts will be “major” and span across marketing and core business departments. Rumors circulating on the Giant Bombcast podcast suggest up to 1,000 positions could be affected. This follows a period of transition under CEO Asha Sharma, who recently reversed course on multi-platform strategy by designating Gears of War: E-Day and Clockwork Revolution as console exclusives.

Pro Tip:
Follow official Xbox Wire updates for confirmed information regarding personnel changes, as internal company memos often precede public studio-specific announcements by several weeks.
Frequently Asked Questions
Are all Xbox games becoming console exclusives again?
No. While CEO Asha Sharma recently moved Gears of War: E-Day and Clockwork Revolution to exclusive status, the company’s broader strategy remains focused on a mix of PC, cloud, and console availability.
Why are hardware costs rising for Microsoft?
According to the internal June 2026 memo, the company is facing a specific hardware component crisis where memory and processing costs have increased fivefold compared to 2024 levels.
Is Microsoft exiting the hardware business?
The company has not announced an exit. Instead, leadership stated they are seeking new partnerships for hardware, suggesting a shift toward licensing the Xbox brand to other PC OEMs.
How do you think a shift toward third-party hardware partnerships will impact the future of gaming? Share your thoughts in the comments below or subscribe to our newsletter for the latest updates on the gaming industry.









