Xbox is preparing to lay off over 3,000 staff and close five development studios, marking the third consecutive year of major cuts. Since 2023, more than 9,000 people have been let go from the Xbox division, raising questions about the company's future strategy and whether it can recover under new leadership.
Mass Layoffs and Studio Closures
The latest round of job cuts, announced on Monday, follows similar reductions in 2024 and 2025. Microsoft, which employs over 225,000 people worldwide, has characterized the layoffs as part of a routine business adjustment. However, critics argue that the scale of the cuts reflects deeper structural problems within Xbox.
Conspiracy theories have emerged, including one promoted by a co-founder of Xbox, suggesting that new boss Asha Sharma has been brought in to wind down the business. While there is no direct evidence, the brand's trajectory has led many to speculate that without Microsoft's vast resources, Xbox would have been sold or mothballed years ago.
A History of Short-Term Thinking
Xbox will celebrate its 25th anniversary this autumn, but its dominance was brief—lasting only the first five years of the Xbox 360 era. Since then, the division has been criticized for a lack of patience, abandoning successful platforms prematurely. The original Xbox was sidelined for the 360, the 360 for Kinect, and the Xbox One launch was marred by an obsession with TV integration.
This pattern of chasing quick wins instead of nurturing successes has persisted. In October 2025, Microsoft raised the price of Game Pass, only to reverse the decision shortly after. Industry observers note that Xbox's problems are manifold, but its failure to cultivate long-term growth is a recurring theme.
Sharma's Vision: Greater Focus on Core Franchises
Asha Sharma, who took over as head of Xbox, has emphasized the need for 'greater focus.' While she has not specified which areas will receive attention, her previous comments suggest a concentration on franchises most closely associated with Xbox: Halo, Gears Of War, Forza, and Fable, alongside Bethesda's heavyweights Fallout and The Elder Scrolls.
Sharma has expressed frustration with the slow development of new Elder Scrolls and Fallout titles, noting that Bethesda has underperformed since Fallout 4 in 2015. Some believe a bold move would have been to replace Todd Howard, but instead, the burden of failure has fallen on ordinary staff.
One potential strategy is to farm out Bethesda franchises to other studios. For example, Microsoft has owned Fallout: New Vegas developer Obsidian for eight years without releasing even a remaster, highlighting ongoing management issues.
The Challenge of Aging IPs
While there is demand for new Fallout, Elder Scrolls, and Forza Horizon games, the same cannot be said for Halo and Gears Of War. Both franchises peaked during the Xbox 360 era and have struggled to remain relevant. Halo's gameplay feels outdated, and Gears Of War's hyper-masculine aesthetic seems stuck in 2006.
Microsoft is also legally obligated to keep Call Of Duty multi-platform for several more years, meaning that franchise contributes only to the bottom line—especially after it stopped being a day-one Game Pass release.
Abandoning Avant-Garde Titles
Under Sharma, Microsoft is expected to step away from more experimental games produced by studios like Double Fine and Ninja Theory. Sharma reportedly believes such acquisitions were a mistake for a company of Microsoft's scale. While this focus is reasonable, doubling down on Halo, Gears Of War, Forza, and Bethesda is a strategy that has already failed.
With so many staff and studios lost, Xbox's options are limited. The company will need to rely more on third-party developers—though many have been acquired in the industry-wide buying spree Microsoft inspired—and make a decisive move on multi-platform releases, rather than the half-measures seen with Gears Of War: E-Day and Clockwork Revolution.
The Multiformat Dilemma
The sensible course would be to abandon plans for Project Helix, the next Xbox console, and become a full third-party publisher, akin to EA in its heyday. However, everything Sharma has said suggests the opposite. Xbox continues to deny that few people are buying its hardware, even before the memory crisis raised prices, and that except for Forza Horizon, first-party games generate little interest.
If Sharma is secretly winding down Xbox, she is committing to the deception. More likely, she is trying to turn back the clock to the pre-Xbox Series X era, or even pre-Xbox One. But this strategy makes no practical sense: games costing hundreds of millions of dollars cannot be exclusive to a console with too small a user base to recoup costs. And few will buy new hardware to play franchises that peaked 15 years ago.
No Magic Wand
Making The Elder Scrolls 6 an exclusive would be folly. If Sharma has an ace up her sleeve, it would be the best news for the gaming industry, which has seen Sony operate without serious competition. But there is little reason to believe in a magic wand. Xbox appears as doomed and desperate as it seems.
