Microsoft’s Xbox division is set for significant restructuring, with layoffs and potential studio closures looming. In a recent memo, Xbox CEO Asha Sharma and chief content officer Matt Booty warned staff of an ‘Xbox reset’ over the next 100 days, citing declining revenue and soaring hardware component prices as key challenges.

Sharma highlighted past investments in content and hardware subsidies—totaling over $20 billion since 2018—which have not yielded the desired results. She also noted a ‘hardware component crisis,’ warning of costs for the 2027 holiday season being five times higher than just two years ago.

Future console business models may see more diverse partnerships, with rumours suggesting PC OEMs could produce Xbox-branded devices using AMD’s new chips. Sharma and her team are considering ‘capabilities across all of XBOX’ to ensure future success in hardware, PC, mobile, and streaming sectors.

The memo reflects a period of strategic realignment for the division, with major decisions set to reshape its business landscape. It signals a difficult but necessary phase as Microsoft seeks to navigate an increasingly competitive industry.