Microsoft Xbox CEO Asha Sharma announced what she described as the most significant restructuring in Xbox history. In a message to employees, Sharma said the company plans to reduce its team by approximately 3,200 roles throughout FY27.
The restructuring will include about 1,600 role eliminations immediately. In addition, four studios will leave Xbox for new management as part of a broader reset of the company’s content portfolio, platform structure, and operating model.
Sharma said Xbox’s business is not healthy, citing margins that are 3 to 10 times lower than comparable platform and publishing businesses. She also pointed to a smaller Gen 9 install base, a higher cost structure, slower-than-expected growth from Game Pass and multi-platform strategies, and a severe hardware crisis affecting the broader industry.
The first part of the restructuring focuses on resetting Xbox’s content portfolio. Sharma said Xbox aggressively expanded its studio portfolio since 2018, but learned it is not the best home for every type of studio and that, in a typical year, it lost 64 cents for every dollar invested.
Compulsion Games and Double Fine Productions will return to management and transition into independent studios with their IP, catalog, and runway for their next games. Ninja Theory and Undead Labs have entered terms to join new ownership with funding to complete and grow Senua and State of Decay 3.
In France, Arkane’s management is beginning required consultation with its Works Council to review potential strategic options. Xbox is also making reductions across Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios, though Sharma said no publicly announced first-party games or projects are being canceled as part of the reductions.
Mojang and King will now report directly to Sharma. She described the two studios as increasingly platform-like businesses and Xbox’s largest studios by monthly active players.
The second part of the plan focuses on resetting Xbox’s platform organization. Sharma said some work currently moves through as many as 14 layers of management, while platform teams are 40% larger than they were at the start of the current generation despite declines in player base and playtime.
Xbox plans to reduce management layers to no more than five, and where possible, three. The company also plans to streamline work across tools through a cleaner code base, shared services, and a 50% reduction in vendor spending.
The third part of the restructuring is an operating model reset. Xbox is establishing a Chief Operating Officer role with end-to-end profit-and-loss responsibility across content, hardware, platform, and services.
Helen Chiang has been promoted to COO and will report directly to Sharma. Chiang has spent nearly two decades at Xbox and has helped build businesses including Xbox Live, Mojang, and the Minecraft franchise.
Dave McCarthy is retiring after 17 years with Xbox. Sharma said McCarthy played a defining role in building the Xbox platform and was a trusted partner during major moments in the company’s history.
Sharma said the changes are intended to position Xbox for a larger future rather than a smaller one. She said the company will continue investing heavily in Xbox, but with greater focus, discipline, and clarity.
KEY QUOTES:
“Our business today is not healthy. We are operating at margins that are 3-10x lower than comparable platform and publishing businesses. We entered Gen 9 with a smaller install base and a higher cost structure. To grow, we bet on Game Pass, multi-platform, and a broader portfolio of content. While those businesses have created meaningful value, they did not grow at the pace we expected.”
“These changes are about a bigger future for XBOX, not a smaller one. The next decade of gaming will be larger, more global, and more creative than anything we’ve seen before. 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.”
Asha Sharma, CEO of Xbox
