Microsoft’s Xbox division is planning major layoffs in July, with the cuts expected shortly after Microsoft’s fiscal year closes on 30 June. Bloomberg’s Jason Schreier broke the report on 10 June 2026, describing the move as new chief executive Asha Sharma overhauls the unit to stem declining revenue, and The Verge has independently reported that preparations have been underway internally for weeks and that a studio closure has not been ruled out. The size and scope of the cuts are not yet known.
Layoffs Expected in July After Fiscal Year Close
According to Bloomberg, multiple people familiar with the company’s strategy say Xbox will make major job cuts next month, timed for just after the 30 June end of Microsoft’s financial year. The same sources say Xbox is also planning to significantly slash budgets for marketing and some other areas of the business. How many roles will be affected has not been disclosed.
The Verge Says a Studio Closure Is on the Table
The Verge independently reported the same plan, with sources saying Microsoft has been preparing for the layoffs internally for weeks and that the cuts could even involve a studio closure or changes to the Xbox studio lineup. A recent Giant Bomb episode mentioned rumours of around 1,000 layoffs across the Xbox division, though no official figure has been confirmed.
What Asha Sharma’s Memo Says
The reports landed alongside a staff memo from Sharma and Chief Content Officer Matt Booty that lays out the financial case for the overhaul. In it, Sharma said the Xbox accountability margin, a metric Microsoft uses to reflect overall profit margin, had fallen to 3 per cent. “Excluding Activision Blizzard King, over the past five years, we have spent over $20 billion on ongoing investments in our content, platform and hardware subsidy, but our annual revenue has declined nearly half a billion during that time,” the memo stated. Sharma said this could not continue and that Xbox had to completely rethink how it does business.
The memo also flagged a looming hardware problem: component costs for the 2027 holiday season are expected to rise to more than five times what Xbox paid two years earlier, with memory costs following a broadly similar trajectory. The joint memo set out five key realities, among them a studio system that is over-extended and a need to reassess the balance of investment priorities for the next five years. For context on the scale of the platform, Xbox cites more than one billion players each year and a total of 72 billion hours across console, PC, mobile and streaming.
Sharma’s First Months as Xbox CEO
This is the first sweeping structural change under Sharma, who became CEO of Xbox in February 2026 and has been open about needing to make hard choices. She has already dropped the price of Game Pass and removed day-one Call of Duty releases from the service after it lost millions of subscribers following an earlier price hike, while recommitting to an Xbox console exclusives strategy for Gears of War: E-Day and Clockwork Revolution. Both of those games had been in development for PlayStation 5 before the decision to make them Xbox console exclusives, and a Halo trailer intended for the most recent PlayStation State of Play showcase was pulled before broadcast. The Verge reports that Sharma and Xbox strategy chief Matthew Ball have been hinting at radically different console business models, with the memo’s mention of hardware partnerships pointing to the possibility of other PC makers building Xbox-branded devices around AMD’s new chips.
A Fourth Straight Year of Xbox Cuts
If the July layoffs go ahead, they would mark a fourth consecutive year of major Xbox cuts. The most recent round came as part of broader Microsoft layoffs affecting 9,100 people, which led to 200 job losses at Candy Crush maker King, the cancelled Perfect Dark reboot and the closure of The Initiative, a cancelled MMORPG at ZeniMax, and a cancelled Everwild with Rare restructured. That came less than a year after another mass layoff of 650 across Xbox, which itself followed a cut of nearly 2,000 only nine months earlier.
For now the timing is the clearest detail: the layoffs are expected in July, once Microsoft’s fiscal year closes on 30 June, with the number of roles affected and whether any studio shuts its doors still to be confirmed.