On Monday morning, the employees of the Redmond giant experienced a real shock.
Financial blood on the carpet. The new boss turns off the lights
In an official statement, Asha Sharma, who took over Xbox in February, stated that Xbox is not doing well. It turned out that the division's profitability is from 3 to 10 times lower than competitors, and the profit margin fell to a critical 3%. Worse, in a typical year Xbox lost as much as 64 cents for every invested dollar.
Effect? 3200 people will lose their jobs at Xbox, which is about 20% of the entire staff. Half of them left the company already on Monday, the rest will leave within the next 12 months. According to leaks, the restructuring and cuts also affect ZeniMax, the owner of studios such as Bethesda, Arkane, Machine Games, ZeniMax Online and id Software.
Bethesda (responsible for the Fallout and The Elder Scrolls series) lost 35 people, and id Software - as many as 95 team members. Unofficial information also mentions the dismissal of half the crew of ZeniMax Online, which is responsible for developing The Elder Scrolls Online.
The purge did not spare the rest of the corporation. Microsoft is laying off another 3200 people outside the gaming division, mainly in sales verticals, totaling 6400 layoffs, which is just under 3% of the 228,000 employees employed worldwide.
Wall Street's reaction was immediate: Microsoft shares in New York fell by 1.7%, although at market close it was a smaller drop of 0.96% to 386.74 PLN.
Chart. Microsoft stock price
Source: TradingView
See also: CD Projekt shares at a steep discount. Expert: "The Witcher 4 will not debut before 2028." The disappointed market awaits financial results and CDR's anniversary stream
The great sale of Xbox's silverware
The biggest surprise, however, is the decision to divest. Microsoft is shedding five key development studios that a decade ago were bought with great pomp by the former boss, Phil Spencer. The studios Ninja Theory (creators of Hellblade) and Undead Labs (State of Decay) will be sold to anonymous investors, though their flagship, current projects will still be developed in partnership with the Xbox brand.
Meanwhile the legendary Double Fine (Psychonauts) and Compulsion Games (South of Midnight) will regain independence and return to the hands of their founders. They will receive start-up funding and full rights to the created brands and the existing game catalog. A process of analyzing strategic options for Arkane Studios in Lyon (responsible for the upcoming Blade) is also underway. Due to restrictive French labor law, a potential sale or spin-off of this team will take much longer.
The previous strategy of bundling billions of USD into the Xbox Game Pass subscription (with the purchase of Activision Blizzard for 69 billion USD at the top) simply ran out of steam, and subscription growth stalled.
A major brake on the growth of this subscription service was the drastic price hike on October 1, 2025, by as much as 50%. Both Sony and Xbox are currently in very crisis moments, which puts the upcoming launch of next-gen consoles in a big question mark.
See also: CD Projekt shares will get a new impulse? A surprising move by CDR regarding The Witcher 4!
Source: Bloomberg.
