Newly appointed Xbox CEO reveals the challenges facing Microsoft's gaming unit
Xbox is reportedly laying off employees next month as Microsoft's gaming unit is set to undergo a "reset" amid a challenging period.
Bloomberg reported that the "major layoffs" will be carried out after the close of Microsoft's fiscal year on 30 June.
The scale of the layoffs was not disclosed, but significant cuts to marketing and other budgets are expected, according to the report.
The layoffs are the first under newly appointed CEO Asha Sharma, who stepped in to the position in February following the retirement of Phil Spencer after a 38-year tenure.
Xbox to take a 'reset'
Sharma, in a memo to employees globally, called for a "reset" in the organisation as she shared the challenges facing Microsoft's gaming unit.
"Our current platform infrastructure is not built for the battle ahead. Our systems are overly complex, spanning hundreds of dependencies, which hinders our ability to move fast," Sharma said in the memo posted by Xbox on its website.
"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. We must increase the value we ship to players while decreasing the time it takes to do so."
The CEO said these realities will be "surprising and even frustrating" to some employees.
"We won't succeed by hiding hard truths, nor will we succeed by doing the same thing and expecting different results," she said.
"Let's reset for a stronger XBOX and build the #1 gaming and entertainment company."
Xbox is ending this fiscal year at about a three per cent accountability margin, down year-over-year.
Its annual revenue has also declined nearly half a billion over the past five years after spending over $20 billion on ongoing investments, according to Sharma.
The CEO also revealed that the gaming unit is facing a "hardware component crisis," as costs for console storage components went up and are expected to have another "significant increase" ahead of the 2027 holiday season.
"Memory costs have followed a broadly similar trajectory. 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," she said.
Sharma, however, noted that its platform teams have already shipped more updates in the last 100 days than during the prior year combined.
The company also has more active partners on Xbox "than ever before."
"Like the 'everyday wins' mentality from the first 100 days, we will sprint to make progress against hardware, content, experience, and services together," Sharma said.
