Microsoft moves to reset Xbox after announcing 3,200 job cuts

Microsoft said it will cut 3,200 jobs from its Xbox video game business, a cost-reduction move tied to what the company described as an unhealthy core operation and a broader hardware squeeze across the industry.

In an internal memo to Xbox workers shared with CBS News, Xbox CEO Asha Sharma said the Xbox unit “is not healthy,” adding that it is operating at margins “that are 3-10x lower than comparable platform and publishing businesses.” Sharma also said Microsoft’s investments in Game Pass, its subscription gaming service, and its multi-platform strategy have grown more slowly than expected.

Microsoft’s restructuring includes an immediate elimination of 1,600 positions, according to the report. The company also plans further cuts as four studios leave the Xbox unit, though the report did not name the studios or specify the timing of those departures beyond indicating they are part of the broader reduction.

The memo linked the company’s decision to the industry environment. Sharma said the company has been adding teams, investment, and time while waiting for a better outcome, but that “now the industry is facing the most severe hardware crisis in its history,” prompting a “reset Xbox.”

The job cuts come shortly after Microsoft announced changes to Xbox console pricing. In June, Microsoft said it would raise the price of Xbox consoles starting August 1, citing higher costs for storage and memory components used in electronic devices.

Under that plan, the report said consoles with 512 GB of storage would increase by $100 to nearly $500, while models with 1 TB of storage would rise by $150. The pricing change reflects how supply costs and consumer demand pressures are affecting the economics of console hardware, even as Xbox continues to rely on software subscriptions and game content to support engagement.

Xbox’s situation also highlights a wider challenge for large technology firms competing in gaming. Hardware cycles, console availability, and the economics of platform subscriptions have grown more volatile, forcing platform owners to weigh investment against whether products are producing competitive margins.

What Microsoft did not disclose in the information provided is as important as what it did. The report did not detail which job categories would be eliminated beyond the immediate 1,600 positions, did not name the studios exiting the Xbox unit, and did not provide a quantified timeline for when “reset Xbox” would translate into improved performance. Microsoft also did not outline specific revenue or cost targets in the reported memo.