Xbox CEO Asha Sharma Talks Layoffs and Restructuring: “We Spread Ourselves Too Thin”

In a recent chat with Fortune, Xbox’s CEO Asha Sharma opened up about some serious changes happening at Xbox, including significant layoffs and a restructuring of the company.

Sharma explained that Microsoft made several ambitious moves in the past, such as launching Game Pass, expanding to multiple platforms, and increasing its studio lineup. However, these initiatives didn’t quite deliver the expected results. “In our quest for growth, we lost sight of our core business,” she admitted.

She emphasized that the effectiveness of any strategy is measured by where resources are allocated, and unfortunately, Xbox stretched itself too thin. This has led to a situation where the business is not in optimal health, making it tough to navigate challenges like the ongoing hardware crisis, which has been exacerbated by an AI-driven demand for components.

Sharma’s memo to staff revealed that the current state of Xbox is concerning. With the company facing significant pressures, she noted that making the necessary changes is crucial. Recently, about 1,600 Xbox employees received the unfortunate news of their layoffs, with an additional 1,600 cuts expected over the next year.

As part of this overhaul, Microsoft is also reevaluating its studio structure. They’re spinning off Double Fine and Compulsion while putting Ninja Theory and Undead Labs up for sale, although potential buyers haven’t been disclosed yet. Arkane Lyon is currently undergoing a consultation process, which will determine the future of the studio and its upcoming project, Marvel’s Blade.

The layoffs aren’t limited to Xbox; Microsoft is trimming its workforce across the board, affecting around 4,800 positions, which is about 2% of the company’s total staff. These changes signal a major shift within the company, aiming to refocus and stabilize its operations in the competitive gaming landscape.