Microsoft’s gaming division is experiencing significant financial pressures, with Xbox reporting a decline in gaming revenue of 7% to $5.3 billion for the quarter ending March 31. Xbox hardware sales particularly suffered, dropping 33%, while revenue from content and services fell by 5%. CEO Asha Sharma, who has been in her role for approximately 100 days, outlined the need for a comprehensive reset in a memo to employees.
In the memo, Sharma and Xbox content chief Matt Booty highlighted factors such as rising costs of hardware components and an overextended studio system as critical issues. They noted that the division's profitability is at a mere 3% “accountability margin,” a metric reflecting business performance. Over the past five years, Microsoft has invested over $20 billion in content and hardware, yet revenue has decreased by nearly half a billion dollars.
Reports indicate that significant layoffs may occur next month, following the end of Microsoft's fiscal year on June 30. Although the memo did not explicitly mention job cuts, it was suggested that substantial reductions in marketing budgets are also planned. This news comes after Sharma's announcement during the Xbox Games Showcase that titles like Gears of War: E-Day will now be exclusive to Xbox consoles, reversing previous multiplatform strategies.