Xbox is more negatively affected by the ongoing component crisis due to choices made by the company, Asha Sharma said.

Microsoft’s Xbox is reportedly planning “significant” layoffs next month as new CEO Asha Sharma attempts to tackle the gaming division’s declining financial standing.

Bloomberg reported that the scale of the layoffs – expected to be announced shortly after the close of Microsoft’s fiscal year on 30 June – is not known. Xbox is also expected to make major cuts to budget for marketing and other areas, sources told the publication.

Yesterday’s (10 June) report shortly followed a memo Sharma and Xbox’s chief content officer Matt Booty sent to employees titled “Xbox Reset”, which outlines some of the division’s spending-related issues.

Over the past five years, Microsoft poured more than $20bn into gaming content, platform and hardware subsidies, Sharma said, but saw revenue declining by nearly $500m during that time.

“We are in a hardware component crisis,” Sharma said. “When I joined as CEO in February, the price we paid for console storage components was over [twice] as high as we paid last fall. These costs have since doubled again.” Sharma expects a further hike in hardware and memory prices.

“While the entire industry is facing a components crisis, we believe we have been impacted more greatly than many of our peers due to the choices we made over the last half decade.”

Sharma pointed to declining profit margins and said that Xbox is unable to produce enough consoles for consumers to purchase.

“For some of you, these realities will be surprising and even frustrating to discover,” she said, hinting at possible layoffs at the division.

Sharma has publicly spoken about Xbox’s organisational challenges since her appointment as head in February. At the recent Bloomberg tech conference, she said that she planned on “resetting the business”, which was “not in a healthy spot.”

“We are the fortunate stewards of industry-defining franchises that have enormous potential and player demand, but we have not adequately funded them to compete and win,” Sharma wrote in the memo.

Xbox has seen its revenue decline in four of the last six quarters, with Xbox Series X and Series S consoles also posting poor sales. Once a gaming juggernaut, Xbox has in recent years fallen behind its rivals Sony and Nintendo. Last November, Xbox was outsold by the motion-controlled Nex Playground console, which was launched in 2023.

“Going forward, we’ll evolve and rebuild our stack, and look at capabilities across all of Xbox and potential M&A [mergers and acquisitions] to help us win in hardware, PC, mobile and streaming,” Sharma said.

Microsoft last announced major layoffs in July 2025, with reports suggesting that the company would cut around 9,000 jobs. Some of Microsoft’s approximately 3,500 Dublin- and Belfast-based employees were affected in the layoffs.

Xbox was expected to be hit the hardest in last year’s round of cuts, which was announced alongside news that the division would be cancelling a number of planned video game projects.

As of the close of Microsoft’s last fiscal year on 30 June 2025, the company employed approximately 228,000 people on a full-time basis, with more than 103,000 based outside the US. According to tech layoffs aggregator Layoffs.fyi, the company cut more than 15,000 jobs in 2025 alone.

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