Xbox CEO Reflects On Massive Cuts: “We Simply Spread Ourselves Too Thin”

Xbox CEO Asha Sharma has shared new details on the significant changes at Xbox, including mass layoffs, studio spinoffs, and more.

In an interview with Fortune, Sharma said Microsoft undertook "a bunch of bets" years ago to help grow the business, including Game Pass, going multiplatform, and beefing up its studio base. These bets did not pay off, and in the process of pursuing these new ventures, "We inherently didn't focus on the core business," Sharma said.

"The number one measure of your strategy is what you put your resources behind, and we simply spread ourselves too thin," she said.

In a memo to staff, Sharma said the Xbox business, as it stands today, is not in a healthy place. If it were, Sharma said the company would be able to "weather the shock of the hardware crisis" that Xbox is facing now due to the AI-fueled run on components and memory.

"With an unhealthy Xbox, it becomes really challenging, and it accelerates a lot of the changes we need to make,” Sharma said.

The restructuring of Xbox is part of a "reset," and a big part of that is downsizing. About 1,600 people at Xbox are losing their jobs today, with another 1,600 cuts to come throughout the next year. Additionally, Microsoft is spinning out Double Fine and Compulsion, and selling off Ninja Theory and Undead Labs, though the buyers for those companies have not been confirmed as of yet. Another studio, Arkane Lyon, is in the "consultation" process and that will seemingly determine the fate of the studio and its in-development project, Marvel's Blade.

The layoffs didn't just hit Xbox, as Microsoft is laying off staff across the entire company, with some 4,800 positions (about 2% of the company's workforce) affected in the latest round of cuts.