Microsoft overhauls Xbox amid broader cuts
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Microsoft is cutting 3,200 Xbox gaming unit jobs, selling four game studios and reshaping the struggling business as part of a broader restructuring announced Monday.
Why it matters: The restructuring underscores the pressure on Microsoft to improve Xbox's profitability amid the broader company's massive shift to AI and related spending.
Zoom in: Xbox will divest four game development studios, and is reviewing strategic options for a fifth, Xbox CEO Asha Sharma, who took over as CEO in February, wrote in a note to staff Monday.
- 1,600 roles in the business are being eliminated Monday, with another 1,600 to be reduced over the next 12 months, according to the memo.
- Xbox is also reducing management layers and shifting investment to focus on "higher priority projects," with a goal to reduce vendor payments by 50%.
"Our business today is not healthy," Sharma wrote, citing Xbox's below-industry margins.
- She noted that previous bets on Xbox's Game Pass subscription service, the move to open its games to other platforms and an aggressive studio acquisition strategy created value, but "did not grow at the pace we expected."
- Now the industry is facing "the most severe hardware crisis in its history," Sharma wrote.
The big picture: Microsoft announced the changes at Xbox as part of a larger restructuring impacting 4,800 roles, or about 2.1% of its global workforce.
- It all comes amid an enormous investment in AI. The company projects to spend $190 billion in 2026 — a roughly 61% jump over the previous year — much of that on AI-related infrastructure.
What they're saying: "[Xbox] has become almost irrelevant, " Gil Luria, head of technology research at D.A. Davidson, said in a CNBC interview. "Every investment dollar now is going into the AI investment and into building data centers."
Between the lines: Microsoft's chief people officer, Amy Coleman, sought to downplay in a blog post any direct relation to AI for the job eliminations announced Monday, though she noted that "AI is changing how work gets done."
- "Customers are navigating this same shift, and they're counting on us to help them through it," she wrote. "We can't do that well unless we're doing it ourselves."
