Microsoft's Xbox division has 1,250 more layoffs to execute through fiscal year 2027, according to a Wall Street Journal report citing internal anxiety around new CEO Asha Sharma's restructuring efforts. The unit already shed 1,600 roles in July as part of a larger plan to cut 3,200 positions, or roughly 20% of its workforce, alongside spinning off or selling several studios. Sharma has described the moves as the most significant restructure in Xbox history, noting the division operates at margins 3-10x lower than comparable businesses after years of heavy spending that failed to drive growth.

Xbox revenue sits around $23 billion and has declined even as the broader gaming market expands, with Game Pass falling short of projections. Sharma has flattened management layers from as many as 14 down to a target of three to five and implemented other operational changes, including reduced vendor spend. The remaining cuts continue to weigh on staff morale, though some employees credit her direct communication style for clarifying the challenges ahead.

Sharma took the role in February and has emphasized returning the business to growth by the end of FY27. Microsoft CEO Satya Nadella has echoed that timeline while the company contends with broader cost pressures, including a hardware component shortage that prompted recent Xbox console price increases.