Microsoft Weighs Xbox Spinoff After $500 Million Annual Revenue Drop
Updated
Updated · GamesIndustry.biz · Jun 15
Microsoft Weighs Xbox Spinoff After $500 Million Annual Revenue Drop
3 articles · Updated · GamesIndustry.biz · Jun 15
Summary
The Information reported Microsoft is considering spinning off Xbox, turning the games unit into a wholly owned subsidiary, or forming a joint venture that could ease a future sale.
Asha Sharma's turnaround plan has won backing from CEO Satya Nadella and CFO Amy Hood, with higher spending proposed to speed development of Halo, Fallout and The Elder Scrolls, though the budget is not final.
Sharma said Microsoft has spent more than $20 billion on Xbox over the past five years excluding Activision Blizzard, while revenue has been falling by about $500 million a year and more layoffs are being planned.
Nadella recently said Xbox must become an "economically sustainable" business, arguing Microsoft has long subsidized gaming and failed to capture enough of the monetization happening around its titles.
As of mid-2026, Microsoft’s Xbox division is facing a critical moment, marked by declining revenue and confirmed layoffs. The company is conducting a major strategic review, reconsidering Xbox’s long-term role within Microsoft’s broader portfolio. This comes as Microsoft grapples with deep-seated challenges around profitability and operational efficiency in its gaming arm. Internal discussions are underway about possible restructuring, including making Xbox a separate subsidiary. These moves highlight Microsoft’s urgent need to address Xbox’s financial struggles and rethink its strategy to secure the division’s future in a rapidly changing gaming industry.