Microsoft Cuts Thousands of Jobs Amid Xbox Revenue Decline

Microsoft reported a 7 percent decrease in annual Xbox revenue, totaling $21.79 billion, driven by a 13 percent drop in hardware sales and a 10 percent decline in content and services for the fourth quarter of the 2026 fiscal year. Microsoft Corporation is currently selling Xbox Series X/S consoles at a loss of approximately $150 per unit due to a global memory component crisis. To mitigate these losses, the company increased the price of the Xbox Series X 1TB model to $750 effective August 2026, though the hardware remains unprofitable.

In response to these financial pressures, the company announced the layoff of approximately 3,200 employees and the closure of several studios, including Ninja Theory and Double Fine. An additional 1,600 cuts are expected over the next 12 months. Xbox CEO Asha Sharma stated that the company was more severely impacted by the component crisis than its peers due to strategic choices made over the last five years. The company is now shifting investment away from niche studios toward major franchises.

Despite the gaming slump, Microsoft's overall quarterly revenue reached $90 billion, supported by growth in Azure, Microsoft 365 Copilot, and a $3.2 billion investment from Anthropic. CEO Satya Nadella expects the gaming business to return to growth in fiscal year 2027. The company is currently developing a next-generation console, Project Helix, expected in 2027 or 2028, with strategy shifting toward a more affordable and flexible model.