Xbox CEO Asha Sharma’s Message to Staff After Laying Off 3,200 Employees

The first round of layoffs will affect about 1,600 employees immediately. Sharma also said four Xbox studios will move to new management as the company reshapes its game portfolio, platform, and overall business operations.

Xbox will cut 3,200 jobs, or about 20% of its workforce, over the next year. The layoffs are part of Microsoft’s broader AI-driven job cuts, with Xbox seeing the biggest impact. In a letter to employees, Xbox CEO Asha Sharma said the company is making these changes because the business is not healthy.

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Sharma also announced that Xbox veteran Helen Chiang has been promoted to Chief Operating Officer and will report directly to her.

She said this is the first time Xbox will have a Chief Operating Officer overseeing the company's profit and loss across its content, hardware, platform, and services. According to Sharma, Chiang will bring these businesses together under one operating model, helping Xbox make better investment decisions, learn from both its successes and mistakes, and stay accountable for its results.

Sharma said Xbox's business is not in good shape. She said its profit margins are much lower than those of similar gaming and publishing companies. She also pointed to a smaller player base for the current console generation, higher operating costs, slower-than-expected growth in Game Pass and multi-platform gaming, and ongoing problems in the gaming hardware market.

She said the first step in the restructuring is to reshape Xbox's game studio portfolio. According to Sharma, Xbox rapidly expanded its studios after 2018 but found that not every studio was the right fit for the company. She added that, in a typical year, Xbox lost 64 cents for every dollar it invested in its studios.

"Mojang and King will now report directly to me. These two studios have increasingly become platforms and are our largest by monthly active players. They bring critical geographic, demographic, and differentiation to XBOX," Sharma said.

"Our business today is not healthy. We are operating at margins that are 3-10x lower than comparable platform and publishing businesses," Sharma said in her email, which she posted on X, while noting that the layoff decision does not reflect the "talent and dedication" of employees.

"This year, we'll invest as much in XBOX as we ever have, but we'll invest with greater focus, greater discipline, and greater clarity, all in service of making XBOX where the world plays and creates," she said.

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