Microsoft’s Xbox division is preparing major layoffs and deep budget cuts to marketing and other areas after June 30.
The measures mark the first major restructuring under new CEO Asha Sharma.
Internal communications cite a sharp drop in accountability margin to 3%, heavy spending of over $20 billion in five years.
Xbox Plans Major Layoffs, Budget Cuts after Revenue Decline
The scale of the layoff is not yet clear, but it is expected that it will take place shortly after the closing of Microsoft's fiscal year
Microsoft’s Xbox Microsoft Developer
Summary
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Microsoft's Xbox is planning major layoffs next month, along with significant cuts to marketing and other budgets, according to a Bloomberg report. While the scale of the layoff is not yet clear, it is expected that it will take place shortly after the closing of Microsoft's fiscal yearon June 30.
The job cut would mark the first major restructuring under the newly appointed CEO, Asha Sharma, in January.
A Reuters report said that the company did not immediately respond to its request for comments.
Xbox's Performance
In recent years, Xbox have faced increasing challenges as Microsoft's bet on subscriptions and cloud gaming has failed to compensate for the declining console sales and shortage of blockbuster titles.
In an internal mail to the employees, Sharma said that Xbox's accountability margin had fallen to 3% and that the company had been spending more than $20 billion on content, platforms and hardware subsidies over the past five years, despite an annual revenue decline by nearly half a billion during the period, Bloomberg reported.
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She said Xbox would need to rebuild its platform infrastructure and rethink its portfolio in the weeks and months to come.
Broader Changes Within Microsoft
Earlier this month, Microsoft instructed its employees to stop using Claude Code and instead shift to using GitHub Copilot CLI, according to a report by The Verge.
The measures appear after the company itself rolled out Claude Code to thousands of its employees in December last year.
The report highlighted that the decision aimed to cut costs and standardise the use of Copilot CLI as the primary command-line interface.
In April, the company overhauled GitHub Copilot's pricing structure from a flat-tier model to a usage-based model, where costs are calculated based on token consumption. The new policy provides Copilot Pro users with $10 in AI credits and Copilot Pro+ users with $39 per month in AI credits.
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During the same period, Microsoft lowered its prices for its Game Pass Service and ended day-one releases of future "Call of Duty" titles on the platform, marking one of the first major strategic changes under the new gaming chief.