Microsoft’s Xbox division is bracing for significant layoffs next month under new CEO Asha Sharma, who has framed the moves as part of a sweeping “reset” to address years of declining revenue despite heavy spending.

A memo co-signed by Sharma and content chief Matt Booty, posted publicly on Xbox Wire, laid out the numbers in dry corporate prose: excluding the Activision Blizzard King acquisition, the division poured over $20 billion into content, platform, and hardware subsidies over five years while annual revenue fell nearly half a billion. Rising hardware component costs, an overextended studio system, and aging infrastructure were listed among the challenges. Bloomberg reported the cuts, expected shortly after the June 30 fiscal year close, will also include substantial reductions to marketing and other budgets; The Verge cited sources indicating preparations have been underway for weeks, with possible studio lineup changes on the table.

Microsoft declined to comment on the Bloomberg report. The exact number of positions affected remains undisclosed, though earlier rumors referenced around 1,000 roles. Sharma, roughly 100 days into her tenure, has previously hinted at “hard choices” ahead while emphasizing the need to return the business to growth.

The announcement arrives amid broader industry contraction, where publishers continue trimming after pandemic-era expansions. Internal preparation for the reductions predates the public memo, aligning with standard post-fiscal-year timing for such actions.