Phil Spencer announced his retirement from Microsoft after 38 years with the company, ending a 12-year run leading Xbox gaming operations. Spencer, who started as an intern in 1988, guided Xbox through the Xbox One's troubled launch and oversaw major acquisitions including the $68.7 billion Activision Blizzard merger.

Asha Sharma, currently heading Microsoft's CoreAI division, will replace Spencer as Executive Vice President for Gaming. Xbox President Sarah Bond also resigned, while Matt Booty gets promoted to Executive VP and Chief Content Officer. Sharma promised "the return of Xbox" and committed to treating games as "art, crafted by humans."

The leadership changes come as Microsoft pivots Xbox away from console exclusives. Spencer pointed to the Xbox ROG Ally as an example of the platform's future evolution. Microsoft remains committed to gaming despite hardware sales challenges, with a new dedicated Xbox console in development but its form still unknown.