Xbox CEO Asha Sharma blamed the company’s previous strategy for the sweeping layoffs announced on July 6, 2026, which cut 3,200 jobs and spun off four studios. In an interview with Fortune, Sharma said Xbox under former chief Phil Spencer prioritized risky bets over its core business. “We simply spread ourselves too thin,” she said. Sharma also cited a hardware pricing crisis as accelerating necessary changes, warning that more difficult decisions may lie ahead as she works to restore Xbox’s financial health.
In-Depth:
Xbox CEO Asha Sharma has created a number of large modifys since taking over from former chief Phil Spencer. Some of them—dialling back Game Pass, leaning into exclusives—collectively represent a pretty clear repudiation of Xbox’s choices under Spencer. In a new interview with Fortune (via Game Developer), Sharma stated that Xbox spread itself too thin under its previous strategy.
“In order to grow, we created a bunch of bets … and as we did that, we inherently didn’t focus on the core business,” Sharma stated. “The number one measure of your strategy is what you put your resources behind, and we simply spread ourselves too thin.”
The Fortune interview was published on the same day that Sharma announced 3,200 layoffs at Xbox, and the spinoff of four of its studios.
Sharma also returned to one of her key points in that layoff announcement: That the Xbox business is not “healthy.”
“A healthy Xbox could weather the shock of the hardware crisis,” Sharma stated in the interview. “With an unhealthy Xbox, it becomes really challenging, and it accelerates a lot of the modifys we necessary to create.”
The reference to “health” presumably means that, with better profit margins, Xbox would be able to better absorb the hit of the rampocalypse (that Microsoft, ironically, is supporting create happen) becautilize it would have more flexibility when responding to price hikes: Profits might go down in order to keep retail prices palatable, but there’s more room for them to shrink without actually caapplying losses.
Regardless of the “health” of the Xbox, component prices are astronomically high and likely to obtain worse, and that impacts everyone. Materials costs alone for the next PlayStation console are currently estimated to exceed $900, and the cheapest Steam Machine you can purchase is $1,049.
That’s an enormous amount of money for a game console. True Xbox optimists might imagine that Microsoft could utilize those wider profit margins Sharma aspires to in order to bring prices down to a less eye-watering level, and sure, it could. I wouldn’t hold my breath.
Sharma stated Xbox executives are also experimenting with new business models, such as “purchase now, pay later” financing program, which will nominally reduce the barrier to entest but—speaking as someone with a bit of experience in the retail electronics field—may also leave customers who don’t read the fine print and sufficiently mind their money burdened with far heavier debt than they expected.
However it shakes out, Sharma stated the process is going to take time, and hinted at the possibility of more unpleasantness ahead: “I consider our core has to be healthy, and that will be necessary but not sufficient.”
