Microsoft's Xbox Gaming division is preparing for significant layoffs after June 2026, according to Bloomberg's Jason Schreier. The cuts come as executive Asha Sharma pushes a comprehensive reset to address mounting financial challenges within the gaming division.

Sharma's internal blog post reveals Xbox spent nearly $20 billion over five years while revenue declined by almost $500 million. Executives blame overextension across multiple strategies and underinvestment in core franchises. The hardware division faces particular pressure from component shortages and pricing issues.

The company plans to double down on exclusive content, emphasizing first- and third-party exclusives and new intellectual property. Sharma and Matt Booty outlined goals to build hardware self-reliance rather than depending on external vendors, making consoles more affordable and accessible.

These changes signal Microsoft's attempt to streamline operations after years of aggressive spending failed to translate into sustained growth. The layoffs and strategic shift reflect broader challenges in the gaming industry's transition toward subscription services and cloud gaming models.