Xbox reportedly preparing major layoffs amid revenue decline

Xbox is reportedly planning layoffs following revenue challenges and broader business restructuring efforts

Xbox is reportedly preparing for a significant round of layoffs next month as Microsoft continues to review spending and restructure parts of its gaming division.

According to a Bloomberg report citing sources familiar with the matter, the cuts are expected to take place after the end of Microsoft's fiscal year on June 30.

The number of employees who could be affected has not been disclosed. The report also states that additional spending reductions are planned across marketing and other operational areas.

The reported layoffs come as Xbox leadership acknowledges a number of financial and operational challenges facing the business.

In an email to employees published on Xbox Wire, Xbox chief executive Asha Sharma and Xbox Game Studios head Matt Booty outlined what they described as five key realities confronting the division.

The executives stated that Xbox has invested approximately $20 billion in content over the past five years, excluding Microsoft's $69 billion acquisition of Activision Blizzard King.

During the same period, annual revenue reportedly declined by nearly half a billion dollars, while the business operated with what they described as a three per cent accountability margin.

“Going forward, this cannot continue,” Sharma and Booty wrote.

The email also highlighted what the executives called a hardware component crisis. According to Sharma, storage component costs for Xbox consoles have risen substantially, creating additional pressure on hardware production and profitability.

Leadership further acknowledged that Xbox had “over extended” through studio acquisitions and had “not adequately funded” teams to compete effectively.

Despite these concerns, Sharma and Booty emphasised the importance of maintaining a strong pipeline of first-party and third-party exclusives as part of the company's long-term strategy.

The pair also pointed to challenges within Xbox’s technology infrastructure, stating that complex systems and reliance on external vendors have slowed development and limited efficiency.

Although the employee memo did not reference the reported layoffs directly, the latest developments follow several rounds of workforce reductions across Xbox and Microsoft over the past two years.