Asha Sharma’s First Move as Xbox CEO Is Layoffs in July and a Complete Business Reset

Division: Xbox / Microsoft Gaming  |  CEO: Asha Sharma  |  Layoffs Timing: July 2026  |  Memo Date: June 10, 2026

Xbox CEO Asha Sharma and Chief Content Officer Matt Booty sent a memo to all Xbox staff on June 10, 2026. The memo confirmed that significant layoffs will follow immediately after Microsoft’s fiscal year closes on June 30. Bloomberg’s Jason Schreier broke the story first, citing multiple sources inside the company.

The Verge independently confirmed the cuts are in preparation. Additionally, Sharma has not ruled out a studio closure as part of the process. Neither outlet named a specific studio.

The Numbers Behind the Reset

Sharma and Booty titled the memo “Next 100 Days: Xbox Reset.” It opens with the financial reality in plain terms. Microsoft has invested more than $20 billion in Xbox over the past five years, and the division currently generates roughly a 3% accountability margin. Sharma described that figure as unsustainable.

However, revenue also fell by approximately $500 million over that same five-year window. Sharma told staff that Xbox has overextended itself across too many studios and projects. The cost of manufacturing its consoles has become unprofitable at current price points.

Furthermore, Microsoft CEO Satya Nadella publicly backed the restructuring. Nadella stated that Xbox must become a sustainable business and confirmed he has signed off on the full Reset plan.

What Is Confirmed and What Is Not

Both Bloomberg and The Verge confirm major layoffs are timed for July 2026, immediately after the fiscal year closes. Marketing budgets will also drop significantly alongside the personnel reductions. The exact studio structure after the cuts remains unconfirmed.

A figure of approximately 1,000 positions has circulated in industry coverage, first reported by Giant Bomb. However, neither Bloomberg nor Microsoft has confirmed or denied that number. Treat it as unverified until Microsoft issues an official statement after the cuts land.

The Five Realities in the Memo

Sharma and Booty structured the Reset around five operational commitments. These are not aspirational goals. Each one is either already underway or actively funded.

• Return of console exclusives: Sharma commits to delivering regular “Signature Exclusives” every year. Gears of War: E-Day and Clockwork Revolution serve as the confirmed model. Xbox needs a concrete reason to exist as a platform, and exclusives are that reason.
• Hardware business model overhaul: The current console subsidy model no longer works at today’s component prices. Xbox is evaluating hardware partnerships with third-party manufacturers. A lower-cost companion device alongside Project Helix remains under discussion, but no specific product is confirmed yet.
• Quality over volume in Game Pass: The strategy of buying studios to sustain a constant Game Pass stream is over. Halo, Forza, and Fallout will receive larger budgets for high-quality releases. Smaller or less commercially viable projects face cancellation.
• Platform infrastructure simplification: Xbox’s technical infrastructure is too fragmented. The division will end many external service provider relationships and rebuild platform features internally. This reduces dependency and speeds up delivery.
• Strict cost discipline: Every investment now faces tighter scrutiny. Sharma states explicitly that budget cuts, project cancellations, and further studio closures remain possible outcomes of the ongoing review.

Asha Sharma: Six Months In

Sharma replaced Phil Spencer as Xbox CEO in February 2026. Her first months focused on rebuilding consumer trust rather than cutting costs. She partially reversed the Game Pass price increase from October 2025, removed the AI Copilot feature after sustained user backlash, and ran a console giveaway for loyal fans.

However, the June 10 memo marks a clear shift from trust-rebuilding to structural surgery. Sharma did not soften the situation in her message to staff. “The business isn’t particularly healthy,” she wrote directly.

Furthermore, Sharma addressed the tension between the Xbox Games Showcase and the Reset memo directly. The showcase confirmed Gears of War: E-Day and Clockwork Revolution as permanent exclusives and unveiled Fable, Senua, Spyro, and State of Decay 3. The Reset is the financial surgery required to make that creative vision achievable.

Project Helix and the Hardware Question

Microsoft confirmed Project Helix, its next-generation console, in March 2026. Developer kits will reach studios in early 2027. Analysts do not expect a consumer launch before late 2027, and 2028 is more likely.

Additionally, analyst projections put the launch price above $999 based on confirmed hardware specifications. The Reset memo’s language around “new business models” has generated discussion about a lower-cost companion device arriving before Helix. Sharma told Fortune that Xbox cannot rely solely on a single premium console.

Still, no budget device is officially confirmed. Nothing in the public memo locks in any specific hardware decision beyond the ongoing evaluation.

Context: Microsoft’s Broader Cuts

The Xbox cuts do not arrive in isolation. Microsoft cut approximately 9,000 positions company-wide in July 2025. The gaming division absorbed a share of those reductions alongside other business units.

Consequently, July 2026 represents a second consecutive year of post-fiscal-year reductions inside the same division. Additionally, The Information reported on June 13 that Microsoft has discussed restructuring Xbox as a wholly owned subsidiary, a joint venture, or a full spin-off. Microsoft has not confirmed any of those options. However, the fact that executives are actively discussing all three paths signals how far Microsoft is prepared to go.

Bottom Line

The July layoffs are coming. The scale remains unconfirmed, the studio at risk is unnamed, and the hardware pivot is still under evaluation. However, the core facts are clear. Xbox runs on a 3% margin after $20 billion in investment, and Sharma has now committed to fixing that publicly. The next 100 days will determine which parts of Xbox survive the Reset and which parts do not.