According to recent reports, Xbox could be facing a significant round of layoffs in the coming months as CEO Asha Sharma puts forward an aggressive business restructuring plan. Just months after Sharma took charge, she publicly acknowledged that the gaming giant is facing serious financial challenges. Although this is just speculation, the Xbox layoffs remain unclear, and the brand will be reviewing overall budgets to improve profitability.

Last fall, Xbox lost millions of subscribers, and Game Pass player retention has almost plateaued. And after this backlash, the company has tried to reduce the prices and bring them to a middle ground to bring back players. However, more important restructuring changes are planned in the upcoming months as the company faces operational issues.

Xbox Faces Massive Reset With Layoff Plans and Budget Cuts

The reported Xbox layoffs appear to be linked by industry sources to Asha Sharma’s “Xbox Reset” initiative. However, the Xbox Wire announcement itself doesn’t reference job cuts. Moreover, in the document, Sharma and Xbox Chief Content Officer, Matt Booty, outlined several issues facing the gaming business. Among them, the most concerning matter was that Xbox is going to close the current fiscal year with an accountability margin of roughly 3%.

Even after spending more than $20 billion over the last five years on development, the annual revenue has declined by nearly $500 million.

Sharma wrote in the official memo, “Going forward, this cannot continue”. She also highlighted that there is a growing hardware component crisis, thereby increasing the manufacturing cost of consoles. The storage component prices have doubled and might even increase to more than 5 times by the end of the 2027 holiday season. What’s worse is that this rise in prices would definitely affect Xbox’s next-generation console plans with the codename Helix.

Sharma says, “In the process, we have found ourselves overextended as we executed on changing strategies in a landscape of more readily available content.” The company had expanded so aggressively over the past few years to support multiple strategies that it now finds itself at a disadvantage. If reports of Xbox layoffs prove accurate, they would represent one of the biggest tests for Asha Sharma’s leadership.

On the note of restructuring changes, Sharma is going forward with bringing back exclusivity to Xbox in order to boost player retention and hardware sales. In the recent Xbox Games Showcase, it was announced that Gears of War E-Day and Clockwork Revolution will not be coming to PlayStation or other consoles.

Sharma states that the sole aim of this restructuring effort is not to bring up the accountability margin by 30%, but instead to make Xbox the number one gaming and entertainment brand.