BIRMINGHAM, Ala. (WBRC) - Amidst major changes at XBOX as the company continues to reset itself and its brand, the gaming giant announced Monday that thousands are set to be laid off.
In a memo sent to employees around the globe, CEO Asha Sharma announced the company would laying off 3,200 employees throughout fiscal year 2027, including 1,600 immediately.
Sharma said she understands it’s painful, but explained that the company has been operating at margins three to 10 times lower than comparable platform and publishing businesses.
“These changes will directly affect people who have poured their creativity into building XBOX,” she said. “Many joined us through acquisitions, while others were recruited here, or sought us out because they loved this industry and loved XBOX. Today’s decisions do not reflect their talent or dedication.”
The company went through rapid expansion in the late 2010s to early 2020s, adding independent and AAA studios alike to its growing portfolio.
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In retrospect, Sharma said that XBOX is not the best home for some of those studios, announcing that four of them will regain independence as they leave the company, including Compulsion Studios and Double Fine Productions.
“It is neither possible nor desirable to own every great independent studio,” Sharma said. “We have also learned that we are not the best home for every type of studio; in a typical year, we lost 64 cents for every dollar we invested. As we reset XBOX, we will help independent creators succeed by providing open development tools and audiences to realize their vision.”
As part of its strategy, XBOX went all-in in recent years on Game Pass, a subscription-based model that saw first-party games released day one on the service.
Sharma said the company entered the ninth generation of gaming with a smaller install base and higher cost structure.
“To grow, we bet on Game Pass, multi-platform and a broader portfolio of content,” she said, adding that while those businesses added value, they didn’t grow at the pace they expected. “As that happened, our core business weakened, and we added more teams, more investment and more time, hoping for a better outcome. And now the industry is facing the most severe hardware crisis in its history. We must reset XBOX.”
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The crisis Sharma referred to is of course the memory shortage that has affected electronic hardware production across the board.
Nearly every industry has felt the pinch, but gaming companies - and gamers - have been hit particularly hard as the influx of AI data centers has eaten up the world’s supply of computer memory.
Microsoft, Sony and Nintendo have all raised the prices of their consoles in recent months. Just last month, XBOX announced a price increase to all of its consoles.
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