Xbox Could Face Major Layoffs in July as Asha Sharma Reveals Revenue Fell Nearly $500 Million in 5 Years

Microsoft’s gaming division is reportedly preparing for another major restructuring. Amid growing rumors of workforce reductions, Xbox chief Asha Sharma acknowledged the company’s financial struggles and revealed that annual revenue has declined by nearly $500 million over the past five years.

The comments come during a period of significant change for Xbox following the departures of Phil Spencer and Sarah Bond earlier this year.

Xbox Reportedly Preparing New Layoffs for July 2026

According to a recent report from journalist Jason Schreier, Microsoft is planning a new round of layoffs that could affect Xbox employees as early as July 2026.

Sources familiar with the matter claim the cuts could take place shortly after Microsoft’s fiscal year ends on June 30. While the exact number of affected employees remains unknown, reports suggest that the company is also considering significant reductions to marketing budgets and other operational areas.

If confirmed, these layoffs would represent the first major workforce reduction under Asha Sharma’s leadership since she took over Xbox earlier this year.

So far, Microsoft has not officially confirmed or denied the reports.

Asha Sharma Admits Xbox’s Current Situation “Cannot Continue”

In a message sent to employees and later published publicly, Sharma reflected on her first 100 days leading Xbox and openly discussed the challenges facing the business.

According to the executive, Xbox finished the fiscal year with an accountability margin of approximately 3%, lower than the previous year.

She also revealed a striking figure regarding Microsoft’s gaming investments:

“Over the past five years, excluding Activision Blizzard King, we invested more than $20 billion in content, platform development, and hardware subsidies, while annual revenue declined by nearly $500 million. This cannot continue.”

The statement highlights the growing pressure facing Microsoft’s gaming division after years of heavy spending on acquisitions, first-party development, infrastructure, and hardware initiatives.

Hardware Challenges and the Future of Xbox

Sharma also addressed ongoing supply chain and component issues that continue to affect the technology industry.

According to the executive, Xbox remains unable to manufacture enough consoles to meet demand and must rethink its hardware strategy while continuing development of Project Helix, Microsoft’s next-generation platform initiative.

“We need a new business model and new hardware partnerships,” Sharma explained.

The executive further acknowledged that Xbox expanded too aggressively through acquisitions and did not always provide studios with the resources necessary to succeed.

She emphasized the importance of maintaining a steady flow of first-party exclusives while also securing strong third-party support.

Xbox Is Still Recovering From Years of Struggles

Although Xbox has recently attempted to rebuild momentum through strategic changes, the company continues to face significant challenges.

Hardware sales have declined in recent years, subscription growth for Xbox Game Pass has slowed, and Microsoft has already closed studios, canceled projects, and increased prices across several products.

Sharma believes Xbox must become more agile if it hopes to reverse the trend.

“Our current infrastructure is not prepared for the battle ahead,” she said. “Our systems are overly complex and make it difficult to move quickly and efficiently.”

For now, Microsoft remains silent regarding the reported July layoffs. However, Sharma’s unusually candid assessment of Xbox’s finances suggests that difficult decisions could be on the horizon as the company attempts to stabilize its gaming business and return to growth.