Xbox is badly affected by the component problem because of decisions made by the company, says Asha Sharma.
Microsoft’s Xbox is reportedly planning “significant” layoffs next month as new CEO Asha Sharma tries to deal with the gaming division’s declining financial position.
Bloomberg reported that the extent of the layoffs — which are expected to be announced soon after Microsoft’s fiscal year closes on June 30 — is unknown. Xbox is expected to make major cuts in budget, marketing and other areas, sources told the newspaper.
Yesterday’s (June 10) report quickly followed a memo Sharma and Xbox chief content officer Matt Booty sent to employees titled “Xbox Reset”, outlining some of the issues related to the division’s spending.
In the past five years, Microsoft poured more than $20bn into games content, platform and hardware support, Sharma said, but saw revenue fall by around $500m in 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 more than 2x what we paid last fall. This cost has doubled again.” Sharma expects further increases in hardware, as well as memory prices.
“While the entire industry is facing a parts crisis, we believe we have had a greater impact than many of our peers because of the decisions we have made over the past half decade.” Sharma pointed to declining profit margins and said Xbox can’t produce enough consoles for consumers to buy.
“For some of you, these realities will be surprising and frustrating to discover,” he said, referring to possible layoffs at this stage.
Sharma has spoken publicly about the Xbox organization’s challenges since he was appointed head in February. At a recent Bloomberg tech conference, he said he plans to “reset the business” that was “not in a healthy place.”
“We are the lucky owners of industry-defining franchises that have great potential and demand for players, but we have not given them enough money to compete and win,” Sharma wrote in the memo.
Xbox has seen revenue decline in four of the past six quarters, with the Xbox Series X and Series S consoles also posting negative sales. Once a gaming juggernaut, Xbox has in recent years fallen behind rivals Sony and Nintendo. Last November, the Xbox was outsold by the motion-controlled Nex Playground console, which was launched a few years ago in 2023.
“Going forward, we will transform and rebuild our stack and look for capabilities across Xbox and potential M&A to help us win in hardware, PC, mobile and streaming,” Sharma said.
Microsoft last announced major layoffs in July 2025, with reports suggesting the company could cut as many as 9,000 jobs. Some of Microsoft’s 3,500 employees – some in Ireland – are affected by the layoffs.
Xbox was expected to take a hit from last year’s round, which was announced along with news that the division would be canceling a number of video games.
As of the end of Microsoft’s last fiscal year on June 30, 2025, the company employed approximately 228,000 people full-time, with more than 103,000 based outside the US. And according to tech laboffs aggregator Layoffs.fyi, the company has cut more than 15,000 jobs in 2025 alone.
Don’t miss out on the information you need to succeed. Sign up for Daily BriefSilicon Republic’s digest of must-know sci-tech news.
