Microsoft will cut jobs across its Xbox Gaming division after June 2026, according to Bloomberg reporter Jason Schreier. An internal email from Asha Sharma reveals the company's struggles with profitability and sustainability, despite major investments in gaming over recent years.

The gaming division has spent close to $20 billion in the last five years, yet annual revenue has dropped by nearly $500 million during the same period. Sharma and Matt Booty's June 10 blog post also highlights ongoing hardware challenges, noting that past Xbox decisions have made the company more vulnerable to component shortages and price increases than competitors.

Xbox has apparently spread itself too thin by pursuing multiple strategies simultaneously rather than focusing on proven franchises. The leadership team acknowledges they haven't adequately funded their most important properties while chasing new directions. Moving ahead, Xbox will prioritize first- and third-party exclusives and develop more self-reliant hardware operations.

The layoffs signal a major strategic reset for Microsoft's gaming arm, which needs to prove it can compete effectively against Sony's PlayStation and Nintendo's Switch while justifying continued investment in the space.