•Microsoft’s gaming division announced Tuesday the creation of Xbox Labs, a new group tasked with turning emerging ideas into playable experiences. The initiative marks an apparent shift from CEO Asha Sharma’s earlier stance on generative AI in game development.
Xbox Labs is described as “a small group of game makers, engineers and scientists whose job is to turn emerging ideas into things our players and developers can experience.” It will be led by Scott Van Vliet, chief technology officer for Xbox, who said the team plans to build in the open and measure success by whether more people are playing and creating.
In a note to employees, Sharma pointed to recent developments that have disrupted traditional boundaries between software and hardware. “In recent weeks, we’ve seen games rapidly decompiled and rebuilt to run on hardware they were never originally designed to support,” she wrote. She noted that Windows PC builds have been translated to run on Apple Silicon or inside browsers through WebAssembly and WebGPU, which now approaches 90% global browser support.
Sharma referenced projects that remix game worlds—such as placing Call of Duty zombies into Skyrim or Miles Morales into Arkham City—and experimental ports. The original Halo: Combat Evolved is now playable in a web browser with 128-player multijoueur, and FromSoftware’s Bloodborne runs on PC.
“These are unmistakably good outcomes for players, even when (and sometimes because) they challenge our existing business models,” Sharma said. She added that Xbox remains committed to its 4Cs—Core, Content, Creator and Connection—and to being “responsible stewards of IP and the communities built around it.”
The announcement contrasts with Sharma’s February remarks when she took over as Xbox CEO, stating the gaming team would not “flood our ecosystem with soulless AI slop.” She described games as art “crafted by humans,” created with innovative technology.
Xbox Labs’ website currently features an ASCII-style page with trailers for Halo: Infinite, Fable, Sea of Thieves, and Gears of War: E-Day. It remains unclear what the team will specifically build.
The move follows Epic Jeux’ confirmation that it is embracing AI-accelerated development. Epic CEO Tim Sweeney called it a “huge pivot” for how the Fortnite and Unreal Engine maker operates, reportedly meaning no more handwritten game code with all future artwork generated through full AI workflows.
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