Microsoft’s Xbox division is reportedly planning layoffs as new Xbox CEO Asha Sharma plans a “reset” for the beleaguered gaming business. Bloomberg, citing anonymous sources, first reported Wednesday that Xbox was planning “major job cuts” within the division in early July after Microsoft’s fiscal year ends on June 30. The same day, Sharma and Xbox Chief Content Officer Matt Booty said in a ...

Microsoft’ s Xbox division is reportedly planning layoffs as new Xbox CEO Asha Sharma plans a "reset" for the beleaguered gaming business.

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Microsoft’s Xbox division is reportedly planning layoffs as new Xbox CEO Asha Sharma plans a “reset” for the beleaguered gaming business.

Bloomberg, citing anonymous sources, first reported Wednesday that Xbox was planning “major job cuts” within the division in early July after Microsoft’s fiscal year ends on June 30. The same day, Sharma and Xbox Chief Content Officer Matt Booty said in a memo to employees that after their first 100 days on the job reviving Xbox, the next 100 days would be devoted to a major overhaul — or a reset, to borrow gaming parlance.

After touting the recent successes of Xbox — Microsoft has been hard at work to reverse the decline in subscribers to its Game Pass service — Sharma and Booty laid out the realities the gaming business needs to navigate.

Microsoft has poured billions of dollars into its gaming division over the past five years, even excluding the $69 billion purchase of Activision Blizzard. The memo said investments in Xbox have surpassed $20 billion since 2021. At the same time, the division’s annual revenue has declined by nearly $500 million.

“Going forward, this cannot continue,” the memo said.

Amid the artificial intelligence boom, which has helped boost Microsoft’s cloud computing sales, Xbox is facing a hardware component crisis. The cost of storage components for gaming hardware has quadrupled since last fall and Microsoft expects another significant increase heading into 2026 holiday shopping season.

As AI demand increases, companies have been spending more on specialized hardware. That coupled with AI’s extraordinary need for memory is leading to higher costs.

For consumers that means demand is outpacing supply for Xbox consoles. Because of this, Xbox needs a new business model for its next-generation console, code-named Helix, according to the memo.

“Our current platform infrastructure is not built for the battle ahead. … We’ve become too reliant on vendors to operate our systems and must become more self-reliant as an engineering culture to build for the future,” the memo said.

The memo from Sharma and Booty did not outline job cuts or other cost-cutting measures. But it did paint a need for a radical change in Microsoft’s gaming division, as the new leadership believes they have been “impacted more greatly than many of our peers due to the choices we made over the last half decade,” when it comes to the hardware-component crisis.

While Microsoft has not had companywide layoffs this year — the company let go of 15,000 employees last year— some divisions within the tech giant have recently made sizable cuts.

Microsoft subsidiary LinkedIn made sweeping cuts to its head count last month, letting go of roughly 5% of its 17,000-person workforce. LinkedIn’s layoffs also followed a leadership shuffle, with LinkedIn Chief Operating Officer Daniel Shapero tapped as the new CEO after previous CEO Ryan Roslansky moved to Microsoft as an executive vice president overseeing LinkedIn and Microsoft Office.

The company has also tried other ways to manage its head count, to offset costs related to its AI push. Microsoft offered an unprecedented buyout to about 8,750 eligible U.S.-based employees last month. If they take it, their last day with the company will be July 1, the beginning of Microsoft’s 2027 fiscal year.

The buyout program is expected to cost the company about $900 million. For comparison, the company’s latest quarterly revenue was $82.9 billion.