Microsoft leadership has signed off on Xbox CEO Asha Sharma’s push to accelerate development on flagship titles like Halo and Fallout, reallocating resources from underperforming projects while leaving open the possibility of restructuring the entire gaming unit. The plan, detailed in reporting from The Information, calls for heavier spending on premium first-party sequels starting in the fiscal year beginning July, with Halo, Fallout, and The Elder Scrolls flagged as priorities to shorten notoriously long cycles. Sharma’s memo to staff emphasized confronting the division’s roughly 3% margins and the billions spent over five years with little revenue growth to show for it.

Layoffs are expected later this month as part of the broader “reset,” with resources redirected toward Bethesda Game Studios and Halo Studios to deliver tentpoles faster. Microsoft is also weighing structural options for Xbox—including spinning it out as a wholly owned subsidiary like LinkedIn or GitHub, forming a joint venture, or even a full separation—though no immediate action is planned. Nadella and CFO Amy Hood have approved the spending increase tied to these changes.

The approach pairs cost discipline with targeted investment in what Sharma called “industry-defining franchises” that have not been adequately funded. Early tests of the faster pace will likely come from the next Halo, Fallout, and Elder Scrolls entries, where Bethesda’s eight-year gap since the last Elder Scrolls reveal underscores the current timeline problem. Whether the structural options stay on the table will depend on whether the reset moves the needle on those margins.