Microsoft is currently undergoing a major restructuring of its Xbox division to address declining business performance. The company plans to lay off nearly 3,200 developers by the end of the 2027 fiscal year. Several studios have already been reorganized, and hundreds of employees have been dismissed, with more rounds of job cuts expected in the future.
A recent report indicates that Xbox executives failed to meet their annual performance targets in five out of the last six years. These performance metrics are directly linked to executive compensation. Specifically, leadership missed key milestones related to Game Pass subscription growth and targets for the content and services segment.
In the most recent fiscal year, which ended in June, Xbox targeted a 4.3% increase in content and services revenue. Instead, the division reported a 6% decline. Prior to 2023, performance assessments focused primarily on Game Pass subscriber growth, after which the focus shifted to revenue targets for content and services.
Despite a previous strategy of multi-platform releases, the Xbox division recorded a profit margin of only 3% last year. Under the leadership of Asha Sharma, the company is now shifting its strategy back toward exclusive content. However, it is estimated that it will take several years for the gaming business to generate sufficient revenue to support its operations and future expansion.
