XBOX Faces Another Massive Blow as Microsoft Preps Summer Layoffs

Microsoft is reportedly gearing up for a fresh wave of layoffs within its gaming division, Bloomberg reports citing insiders familiar with the company’s plans. The cuts are expected to follow the close of Microsoft’s fiscal year on June 30, though the exact number of employees to be affected remains undisclosed. The story also highlights a significant slashing of marketing budgets and other operational expenditures across the Xbox business.

The announcement comes at a particularly sensitive juncture for the brand, after Xbox’s new CEO, Asha Sharma, publicly declared at Bloomberg Tech that the division needed to be “reset.” She described the current state of the business as “unhealthy,” a sentiment echoed in an internal memo circulated to employees this week and later shared on Xbox Wire.

In that memo, Sharma stated that Xbox’s operating margin had slipped to a mere 3%, the metric Microsoft uses to gauge the division’s profitability. She noted that, excluding Activision Blizzard King, Microsoft has poured over $20 billion into content, platform development, and hardware subsidies over the past five years, while annual revenues have fallen by nearly $500 million during the same period. “Looking ahead, this cannot continue,” she wrote.

“We just shared with our team the realities we need to navigate as we work to reset the XBOX business. We won’t succeed by hiding hard truths, nor will we succeed by doing the same thing and expecting different results.” — Asha Sharma, June 10, 2026. Read the full note.

Microsoft’s Xbox division has broadened its studio network to support multiple concurrent strategies—including subscription services, streaming, and hardware—according to industry insider Sharma. Yet the rapid expansion has left the company feeling “overburdened” as it navigates shifting directions in an increasingly crowded content market.

The message signals that Microsoft will reassess its studio portfolio and game slate amid this realignment. Sharma argues that Xbox owns franchises with “massive potential” and strong user demand, but acknowledges that not all have received the necessary funding to compete. He stresses that a robust mix of first‑party exclusives, third‑party titles, and fresh intellectual properties will be essential for the brand’s future.

New layoffs are slated to take effect just one year after Microsoft’s summer round of 9,000 job cuts, which heavily impacted Xbox and led to the cancellation of projects such as the reboot of Perfect Dark and Everwild. The company also implemented significant reductions in 2023 and 2024, including 1,900 layoffs across Activision Blizzard, Bethesda, and Xbox.