Microsoft considers spinning off Xbox amid financial struggles

Microsoft Weighs Xbox Spinoff as Division Faces Mounting Pressure

Microsoft is considering structural options for its struggling Xbox gaming division, including a potential spinoff or reorganization as a wholly owned subsidiary, The Information reported on Friday, citing three people with direct knowledge of the discussions.channelnewsasia

The report adds that the company is also weighing a possible joint venture with other partners as part of a broader overhaul that could make the gaming business easier to sell. No restructuring is imminent, and all options remain on the table, according to the report.channelnewsasia

A Division in Crisis

The spinoff discussions come amid escalating turmoil at Xbox. On Tuesday, new Xbox CEO Asha Sharma sent an internal memo titled “The Next 100 Days: Xbox Reset,” marking her 100th day in the role and laying bare the division’s financial struggles. The unit’s “accountability margin” — Microsoft’s internal profit metric — had fallen to just 3%, she wrote.gigazine

“Excluding Activision Blizzard King, over the past five years, we have spent over $20 billion on ongoing investments in our content, platform and hardware subsidy, but our annual revenue has declined nearly half a billion during that time,” Sharma wrote. “Going forward, this cannot continue.”thestar

Bloomberg reported that Xbox is planning major layoffs shortly after the close of Microsoft’s fiscal year on June 30, along with cuts to marketing budgets. Reuters confirmed the planned job cuts on Tuesday.reuters

Games Pipeline and Strategic Pivot

Even as Microsoft considers the division’s corporate future, Xbox is pressing forward with its game releases. At the Xbox Games Showcase on June 6, the company confirmed Halo: Campaign Evolved for a July 28 launch and revealed Gears of War: E-Day for October. A Fallout 3 remaster remains in active development, though no release date has been set.kotaku

Sharma has also begun reversing Xbox’s recent multiplatform strategy, announcing that Gears of War: E-Day and Clockwork Revolution will remain exclusive to Xbox — a move that surprised many employees and reportedly strained relationships with Sony.thestar

New Leadership, Familiar Challenges

Sharma took over in February after Phil Spencer retired following 38 years at Microsoft. She has described her mandate as making Xbox “the number one gaming and entertainment company” rather than hitting enterprise-level margins. But industry analysts have long debated whether Xbox would be better positioned outside of Microsoft. In February, Rhys Elliott of Alinea Analytics called a spinoff “the most rational long-term strategy.”yahoo

With component costs for its next-generation console expected to quintuple by the 2027 holiday season, Sharma warned that “we need a new business model and partnerships for hardware.”thestar