Microsoft CEO Satya Nadella said there is more monetization of Xbox games happening on YouTube than at Microsoft itself, pointing to streaming as a bigger revenue source than game sales or subscriptions within Xbox [1, 2]. Nadella highlighted the company’s need to innovate in hardware and games in a way that is economically sustainable, moving away from subsidizing entertainment. "The challenge we have is we’ve not been monetizing that entertainment," he said. "No one can accuse Microsoft of not having invested for the last 25 years. Now, we have to turn this into a sustainable business" [1, 2].
Xbox is undergoing a challenging period with a strategic reset led by Xbox CEO Asha Sharma. Sharma outlined a plan for her first 100 days in a June 10 memo that noted some positive progress but warned of an impending "hardware component crisis" [1]. The division lost millions of Game Pass subscribers following a price hike in October 2025, impacting revenue and growth [1].
Reports indicate the Xbox division plans significant layoffs in July 2026, with around 1,900 jobs reportedly targeted as part of cost-cutting efforts [1, 2]. The layoffs come after Microsoft’s $68.7 billion acquisition of Activision Blizzard, adding pressure to deliver returns on the massive investment while facing rising costs in game development [2].
Industry veterans acknowledge the broader challenges in the video game sector, citing monetization pressures and rising development costs as key headwinds [2]. Nadella emphasized the importance of balancing investment with sustainable economics, saying, "That doesn’t mean we go do things that are unnatural. We want us to do what is really our job, which is to build great games, build great hardware, but we’ve got to do it in an economically sustainable way" [2].
Xbox CEO Asha Sharma’s memo from June 10 provides a near-term view of the operation ahead of planned layoffs later this month, underscoring the difficult adjustments the division faces as it seeks to stabilize and grow.
