Xbox's New CEO Is Cutting Jobs and Calling the Last Five Years a $20 Billion Failure

The Memo Says It Plainly

Xbox CEO Asha Sharma and gaming content chief Matt Booty sent an internal memo to staff titled "Next 100 Days: XBOX Reset." The language was unusually blunt for a corporate communication.

"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," the memo states. "Going forward, this cannot continue."

Microsoft spent $20 billion and the business got smaller.

What's Coming and When

Bloomberg reported that Microsoft will announce a new round of layoffs after the company's fiscal year ends June 30. The scale has not been officially confirmed. The announcement is expected to follow, not precede, the fiscal year close.

Sharma, who is roughly 100 days into the CEO role, described the current moment as a pivot from assessing the business to actively restructuring it. The memo frames the cuts as necessary to "reset the business" under a sustainable cost structure.

The Problems Sharma Laid Out

The memo identified several compounding pressures. Hardware sales are soft. Game Pass momentum has plateaued. Management is now using the phrase "hardware component crisis" to describe supply-chain or manufacturing problems affecting the console business.

Xbox ends its fiscal year at roughly a 3% accountability margin, down year-over-year. That is a thin number for a division inside one of the most profitable companies on earth.

On the other hand, the memo notes that over one billion players engage with Xbox and Microsoft games annually, logging 72 billion hours across console, PC, mobile, and streaming. The franchise portfolio — Call of Duty, Halo, Minecraft, Diablo, World of Warcraft — remains among the most recognized in the industry. Sharma's camp would argue that the audience is there; the monetization model just needs repair.

This Is Not the Same as the 2024 Cuts

The Verge reported in January 2024 that Microsoft cut 1,900 employees from Activision Blizzard, ZeniMax, and Xbox, about 8 percent of a 22,000-person gaming workforce. That round came shortly after Microsoft's $68.7 billion Activision Blizzard acquisition closed, and then-Gaming CEO Phil Spencer framed it as eliminating overlap between the newly merged organizations.

ZeroHedge's framing of the upcoming cuts references the 2024 round without clearly distinguishing it from the new, separate restructuring now being planned. Those were two different events with different causes.

The current cuts Sharma is preparing are driven by the longer-term revenue decline, not integration overlap.

The Honest Case for Concern

Critics of Microsoft's gaming strategy make a fair point: the Activision Blizzard acquisition was sold to regulators and investors partly as a vehicle for Game Pass growth. If Game Pass has plateaued and the combined entity's margin is shrinking, that raises legitimate questions about whether the deal delivered what Microsoft promised and whether workers are now paying for an executive-level miscalculation with their jobs.

The memo doesn't address that directly. What it does acknowledge is that the current investment-to-revenue ratio is broken, and that fixing it requires cutting costs.

What Microsoft Has Not Said

As of June 12, 2026, Microsoft has NOT announced specific job-cut numbers for this upcoming round. No charges have been filed, no regulatory investigation into the restructuring has been announced, and no severance details have been made public for the forthcoming layoffs.

The company has also not addressed publicly whether AI automation is contributing to the headcount reductions. ZeroHedge noted that Bloomberg's original report did not mention AI as a driver. When the formal announcement comes after June 30, the absence of any reference to AI will be worth watching, given that Microsoft has simultaneously been investing billions in AI infrastructure.