Xbox leadership faces a reckoning. New CEO Asha Sharma and Matt Booty, head of Xbox Game Studios, plan major job cuts across the division next month as part of a business "reset". Sharma's language signals significant layoffs ahead.
The move reflects Xbox's overextension. Sharma stated directly: "We have found ourselves over extended." This admission comes after years of aggressive acquisition spending, including the Activision Blizzard deal that closed in 2023. Microsoft has been burning cash on game development while struggling to deliver hit releases that justify the spending.
Xbox Game Pass, the subscription service built to drive the division's growth, has plateaued in its expansion. First-party titles like Starfield faced mixed receptions, and major franchise delays have stalled momentum. Meanwhile, competitors tightened their rosters. PlayStation cut hundreds of jobs in 2024. Now Xbox follows suit.
The layoffs target a business that swelled too fast. Microsoft acquired Bethesda, Activision Blizzard, and numerous smaller studios, tripling studio count without corresponding revenue growth. Publishing costs exploded. Game development timelines stretched. The infrastructure Sharma inherited sprawls across studios worldwide with competing priorities and overlapping teams.
This reset prioritizes profitability over growth ambitions. Xbox will likely consolidate studios, cancel projects in early stages, and axe underperforming initiatives. Booty's role overseeing Game Studios makes him central to the restructuring decisions. Expect announcements about studio closures or mergers alongside workforce reductions.
The timing matters. Microsoft reported gaming division revenue decline in recent quarters. Pressure from investors and parent company leadership forced action. Sharma, relatively new to the CEO role, inherited a bloated operation and chose aggressive cuts to demonstrate control and reset expectations.
This restructuring signals a shift in strategy. Xbox moves from