Xbox CEO Asha Sharma announced a major business reset on June 12, 2026, including significant layoffs starting in July and deep budget reductions across marketing and other areas [1, 2, 3, 4]. She said Xbox's profit margin has dropped to about 3%, down year-over-year, with nearly $500 million in annual revenue lost compared to five years ago [1, 5, 3, 4]. Rising costs and shortages of RAM and storage components have driven Xbox’s hardware build costs 2.75 to 5 times higher than at launch and two years ago, forcing a rethink of pricing and business models [6, 7, 1, 2, 4]. Sharma said, “We've reached a point where it will be hard to imagine that mass audiences can afford thousands of dollars to spend on a console generation,” and predicted “radically different business models that we never expected” later this year to boost affordability [6].
She emphasized that focusing solely on high-performance premium consoles is no longer enough given the affordability crisis. "We must think about other ways to think about the cost construction of the console, we must think about how we create different plans, so more people can participate in the console," Sharma said [6, 8]. Past subscription models like Xbox All Access could be adapted as part of these changes [6, 8].
The Xbox studio system is described as overextended and underfunded. Sharma indicated the company would reassess investment priorities and its content pipeline for the next five years [5, 2, 3, 4]. Xbox will also focus more on console exclusives, with upcoming titles like Gears of War: E-Day and Clockwork Revolution confirmed as Xbox-only [1, 9, 4].
New hardware efforts will explore alternative and flexible storage solutions alongside innovative game design to reduce costs [6, 8]. Sharma called the next 100 days crucial to making Xbox the world’s leading gaming and entertainment company [1, 10, 4]. Xbox Chief Strategy Officer Matthew Ball expressed optimism, saying, "I'm a strategic optimist. I think it is incredibly defeatist to think that there's any scenario that you can't do better, that you can't improve" [9].
Sharma warned, "We won’t succeed by hiding hard truths, nor will we succeed by doing the same thing and expecting different results" [2]. The announced layoffs and budget cuts are expected to begin in July, followed by the rollout of new console business models later in 2026 designed to make Xbox hardware more accessible to a mass audience [6, 1, 2, 8].
