xbox CEO Asha Sharma has indicated that Microsoft’s gaming division will undergo significant layoffs and structural changes, according to a staff memo posted on the Xbox blog.
The memo does not explicitly mention layoffs, but sources told Bloomberg that cuts are imminent and are expected to be announced shortly after Microsoft’s fiscal year ends on June 30. Reports from Giant Bomb suggest that around 1,000 employees could be affected.
Sharma also mentioned that Xbox is considering “radically different” business models for future console hardware, citing rising storage costs and concerns about consumer spending.
What Asha Sharma’s memo reveals and how storage costs are reshaping Xbox’s strategy
Sharma noted that Microsoft may have overreached with its acquisitions of major studios such as ZeniMax, the publisher of the Elder Scrolls series, Obsidian Entertainment and the Purchase of Activision Blizzard for $69 billion.
Aside from the deal with Activision, Microsoft’s gaming division has invested more than $20 billion over the past five years in hardware acquisitions and subsidies.
Over the same period, annual gaming revenue has declined by nearly $500 million, and Microsoft expects to close the fiscal year with a 3 percent drop in profit margins.
Sharma highlighted supply challenges caused by AI data center expansions, which have led to a sharp rise in digital storage prices. When Sharma took over in February, Microsoft was paying twice as much for Xbox storage compared to the previous fall.
Since then, prices have doubled again. Sharma expects Xbox storage costs to quintuple between fall 2025 and the holiday season of 2027, which is the expected launch window for the next Xbox console, codenamed Helix.
Leaked chip design documents have previously suggested that Helix will be expensive due to its high-end hardware specifications. The RAM shortage, driven in part by Microsoft’s investments in AI, is now expected to drive console prices to new levels.
Radically different business models
In a previous interview with Fortune, Sharma said it’s increasingly difficult to imagine a time when large audiences can afford to spend thousands of dollars on a console generation.
He suggested that we will likely see new business models emerge later this year, which could be quite different from traditional approaches.
The memorandum follows several major strategic changes under Sharma’s leadership. Microsoft reduced the price of Game Pass Ultimate from $29.99 to $22.99 per month after a price increase in October 2025 led to the loss of millions of Xbox subscribers, Xbox services director Matthew Ball confirmed.
Call of Duty will no longer be available on the first day of Game Pass and will instead launch on the platform a year after its initial release.
Microsoft is also reintroducing console exclusivity for select titles, such as Gears of War: E-Day, scheduled for Xbox consoles in October 2026, and Clockwork Revolution in 2027.
Both titles will remain exclusive to Xbox consoles indefinitely, despite previous hints that E-Day could be ready for PlayStation 5. The company has stated that its approach to exclusivity will vary on a case-by-case basis, especially for single-player games.
Live service titles like Call of Duty will continue to be supported on PlayStation and Nintendo platforms. Early UK sales data suggests that Forza Horizon 6 has helped increase sales of Xbox Series consoles, proving that releasing popular titles on multiple platforms can drive hardware share.
Wider industry layoffs and Xbox’s plan to ‘reboot’
Microsoft has now announced that its job cuts since the beginning of 2023 total around 39,000, and upcoming layoffs could raise that number to around 40,000.
Ubisoft is also expected to announce layoffs, with reports indicating that approximately 380 positions will be eliminated at its studios in Belgrade and Winnipeg.
The Belgrade studio will focus solely on the Rainbow Six franchise, while the Winnipeg location primarily develops the company’s Anvil and Snowdrop graphics engines.
Microsoft has not provided an exact date for the layoffs or confirmed the final number beyond what was reported. In a memo, Sharma described the changes as part of a broader effort to “reset” the Xbox business ahead of the next generation of consoles.
