Microsoft cuts 3,200 Xbox jobs amid revenue decline

Microsoft-owned Xbox will lay off about one-fifth of its workforce and sell off some development studios as it grapples with falling revenue and acquisitions that failed to deliver, CEO Asha Sharma said yesterday.

The cuts amount to roughly one-fifth of Xbox’s workforce. In a memo, Sharma said 1,600 employees will be laid off this week, followed by another 1,250 during the current fiscal year.

Microsoft is also divesting four to five game studios acquired over the past decade, a move expected to eliminate more than 350 additional jobs at Xbox.

The pivot comes as Xbox reported a 5% year-over-year revenue decline in the quarter ended March. Its profit margin fell to 3% for the fiscal year ended June, down from the previous year.

The growth bet
Microsoft was in expansion mode. It acquired Bethesda parent ZeniMax Media for over $8 billion five years ago and Call of Duty maker Activision Blizzard for $68.7 billion. The tech giant expected the deals to accelerate growth for its Game Pass subscription service.

But the gamble didn’t pay off. Game Pass currently has only about 30 million subscribers, well short of the 77 million projected for this year.

To boost sales and profitability, Sharma is also cutting the number of published games to focus on major franchises like Minecraft, Candy Crush, and Fallout.