Microsoft CEO Satya Nadella again linked the Xbox reorganization to the need to build an economically sustainable business. In an interview with the podcast Sources, published on Friday (25), the executive praised the simplification led by the division's new leadership and said that the next step is to find a model capable of bringing the company's games to more people.
The statement came three days after Xbox announced the elimination of 268 positions at Halo Studios, other first-party studios and central management areas. According to Matt Booty, Xbox Chief Creator Officer, the changes made since July leave the company approximately 75% of the way through the previously announced restructuring.
Nadella said he was confident in the portfolio of intellectual properties and in the ability of the remaining studios to produce new games. At the same time, he said Microsoft needs to develop a “sustainable business model” to expand the reach of its operation as a publisher and platform on PC and Xbox.
The reorganization began on a larger scale in July, when the company announced a plan to reduce approximately 3,200 positions over fiscal year 2027. About 1,600 cuts occurred at that moment, along with the departure of four studios from the Xbox structure.
Microsoft tries to narrow the gap between investment and return at Xbox
The company said the business operated with margins much lower than those of comparable platforms and publishers. Before the restructuring, Xbox leadership said that, excluding Activision Blizzard King, it had invested more than US$ 20 billion in content, platform and hardware subsidies in the previous five years.
In the same period, the annual revenue had declined by nearly US$ 500 million, according to figures presented by Microsoft itself. The combination of high costs, limited growth and pressure on margins began to guide the review of the division's structure.
In the quarter ended in June, Xbox content and services revenue fell 10% year over year. Despite the cuts and the reorganization, Microsoft maintains the forecast that the gaming business will return to growth in fiscal year 2027.
