Xbox’s new boss has told staff the numbers are pants and the spending binge cannot carry on.
Microsoft Gaming chief executive Asha Sharma, about 100 days into the job, gave staff a blunt memo on 10 June 2026 saying that Microsoft’s gaming business had been splashing cash while running on skinny margins and sliding revenue. That, she said, “cannot continue.”
The memo landed on the Xbox blog as the Verge reported that Xbox is preparing major job cuts next month, after Microsoft closes its fiscal year on 30 June 2026.
Xbox is expected to cut marketing and other budgets, but the scale of the layoffs is still unclear. Sharma did not mention layoffs directly. Instead, she and Xbox content chief Matt Booty described a business needing a sweeping reset.
They pointed to rising hardware component costs, an overextended studio system and ageing platform infrastructure as the sort of expensive nonsense now haunting the division.
Xbox will end the fiscal year with about a three per cent “accountability margin,” Microsoft’s internal measure for business profitability.
Sharma and Booty wrote: “Excluding Activision Blizzard King, over the past five years, we have spent over $20 billion on ongoing investments in our content, platform, and hardware subsidy, but our annual revenue has declined nearly half a billion during that time. Going forward, this cannot continue.”
Microsoft’s latest quarterly filing shows gaming revenue fell seven per cent to $5.3 billion for the quarter ended 31 March 2026. Xbox hardware revenue dropped 33 per cent on lower console sales, while Xbox content and services revenue fell five per cent.
The memo followed the Xbox Games Showcase on 7 June 2026, where Sharma reversed Microsoft’s multiplatform waffle. She said Gears of War: E-Day and Clockwork Revolution will be Xbox console exclusives.
Bloomberg reported that a PlayStation 5 version of the new Gears of War had been in development before getting binned ahead of the announcement. Microsoft’s longtime Xbox leader Phil Spencer retired in February after 38 years at the company.
Sharma, a former Instacart chief operating officer and Meta product executive, previously ran Microsoft’s CoreAI product organisation.
