Xbox is planning major layoffs in July as new CEO Asha Sharma overhauls the unit

Microsoft’s Xbox division is preparing major job cuts for July. That’s the core of a report from Bloomberg’s Jason Schreier, who broke the news first on Bluesky and then in a fuller Bloomberg story, and Microsoft has not made any official statement.

The timing tracks with the calendar. Microsoft’s fiscal year ends June 30, and the cuts are expected shortly after, as new Xbox CEO Asha Sharma restructures a business whose economics she has told employees are no longer sustainable. In a letter to staff, she put the math plainly: the division’s current trajectory “cannot continue”. For anyone working at a Microsoft studio, or hoping a favorite franchise survives the next year, the next few weeks are the ones to watch. This would be the fifth major round of gaming cuts since the Activision Blizzard deal closed, and the first under a CEO who arrived only in February.

What we know

Schreier posted a single line on Bluesky: “Xbox is planning major layoffs next month.” He then filled in the rest in a fuller Bloomberg report.

• The cuts are expected shortly after Microsoft’s fiscal year closes on June 30, the standard window for the company’s restructuring moves.
• In a letter to staff, Sharma framed the math bluntly. The division’s “accountability margin,” an internal profitability figure, came in at 3%, and as she put it, the current trajectory “cannot continue”.
• The same memo said Xbox had “found ourselves over extended” and that spending excluding Activision Blizzard King ran past $20 billion over five years while annual revenue slid by nearly half a billion dollars.
• Bloomberg reports Xbox is also planning to cut marketing budgets and spending in other areas of the business.

What we don’t know

The single biggest gap is the headcount. Schreier was explicit that the scale isn’t clear yet, and as of June 13 no source has put a credible number on it.

• The size of the cuts. Don’t trust any figure floating around, because none of the three outlets reporting this has one.
• Whether a studio closes. The Verge, reporting the same plan, said sources suggested the cuts could involve a studio closure or changes to the Xbox studio lineup. That’s a possibility, not a confirmed outcome.
• Which teams are exposed. Sharma’s “over extended” line points at the studio system, but the memo named no specific studio.
• Microsoft’s official position. The company hasn’t confirmed the layoffs, the timing, or the margin figure publicly.

Who reported this

The story comes from Jason Schreier, Bloomberg’s lead games reporter and the most reliable voice on Microsoft’s gaming business. He posted the first line on Bluesky, then published the detailed account at Bloomberg. The Verge independently reported the same plan, adding the studio-closure detail, and Engadget published Sharma’s letter to staff. Three outlets, one direction. That’s about as solid as an unconfirmed report gets before the company speaks.

The backdrop is years of cuts. Microsoft eliminated 1,900 gaming roles in January 2024, close to 9% of the division, weeks after the $69 billion Activision Blizzard purchase closed. Another 650 went later that year. Then July 2025 brought a company-wide round north of 9,000 jobs that hit gaming hard, with closures and cancellations across studios. Sharma, who took over Xbox in February after running Microsoft’s CoreAI group, inherited a unit that has been shrinking on a roughly annual cadence.

What this means for you

If you make games at a Microsoft studio, the prudent read is that July is a real risk window, not a rumor to wave off. Three credible outlets agree on the direction, and the boss has put the unsustainable-margin case in writing. If you play Xbox games, watch the studio lineup rather than the headline number: a closure or a canceled project tells you more about what’s actually changing than a headcount ever will. And if you’re tracking the wider games industry, this is the pattern, not the exception. The post-Activision consolidation that hollowed out Bungie’s roadmap is the same force here, just aimed at a different part of the org. The one thing worth waiting for is Microsoft’s own word. Until it speaks, every figure floating around is an estimate.