According to a staff memo published on the Xbox blog, Xbox CEO Asha Sharma has indicated that there will be significant layoffs and structural changes at Microsoft’s gaming division.
The memo doesn’t explicitly mention layoffs, but sources told Bloomberg that the cuts are imminent and are expected to be announced soon after Microsoft ends its fiscal year on June 30. Giant Bomb’s report suggests that around 1,000 employees may be affected.
Citing concerns about rising storage costs and consumer spending, Sharma also mentioned that Xbox is considering a “fundamentally different” business model for future console hardware.
What Asha Sharma’s memo reveals and how storage costs are reshaping Xbox’s strategy
Sharma said Microsoft has moved ahead with its acquisitions of major studios like ZeniMax, publisher of the Elder Scrolls series, Obsidian Entertainment and its $69 billion purchase of Activision Blizzard.
In addition to the Activision deal, Microsoft’s gaming division has invested more than $20 billion on acquisitions and hardware subsidies over the past five years.
Over the same period, annual gaming revenue has declined by approximately $500 million, and Microsoft expects to end the fiscal year with a 3 percent decline in profit margins.
Sharma highlighted the supply challenges caused by AI data center expansion, which has led to a sharp increase in digital storage prices. When Sharma took over in February, Microsoft was paying twice as much for Xbox storage as it was the previous fall.
Since then, prices have doubled again. Sharma expects the cost of Xbox storage to increase fivefold between fall 2025 and the holiday season of 2027, which is the anticipated launch window for the next Xbox console, codenamed Helix.
Leaked chip design documents previously suggested that the Helix would be expensive due to its high-end hardware specifications. The shortage of RAM, partly due to Microsoft’s investments in AI, is now expected to push console prices to new levels.
Fundamentally different business models
In an earlier interview with Fortune, Sharma had said that it was difficult to imagine a time when large audiences would be able to spend thousands of dollars on a console generation.
He suggested that we will likely see new business models emerging later this year, which may differ significantly from traditional approaches.
The memo follows several significant strategy changes under Sharma’s leadership. Microsoft is reducing the price of Game Pass Ultimate from $29.99 to $22.99 per month in October 2025 after millions of Xbox customers were lost due to a price hike, as confirmed by Xbox Chief Services Officer Matthew Ball.
Call of Duty will no longer be available on Game Pass on day one and will 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, set for Xbox consoles in October 2026, and Clockwork Revolution in 2027.
Both titles will remain exclusive to Xbox consoles indefinitely, despite earlier indications that E-Day could be slated for PlayStation 5. The company has stated that its approach to exclusivity will vary on a case-by-case basis, particularly for single-player games.
Live-service titles like Call of Duty will continue to support PlayStation and Nintendo platforms. Early UK sales data shows that Forza Horizon 6 has helped boost sales of Xbox Series consoles, suggesting that releasing popular titles on multiple platforms can boost hardware engagement.
Wide industry layoffs and Xbox’s ‘reset’ plan
Microsoft has now announced that its total number of jobs will be cut by about 39,000 through the beginning of 2023, with upcoming layoffs potentially pushing that number to about 40,000.
Ubisoft is also expected to announce layoffs, with reports indicating that about 380 roles will be cut at its studios in Belgrade and Winnipeg.
The Belgrade studio will focus solely on the Rainbow Six franchise, while the Winnipeg location will primarily develop the company’s Anvil and Snowdrop graphics engines.
Microsoft has not given an exact date for the layoffs or confirmed more than the last reported number. In a memo, Sharma described the changes as part of a broader effort to “reset” the Xbox business ahead of the next console generation.
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