Xbox CEO admits Microsoft hasn’t done enough to ‘compete and win’ in candid new memo
"We are the fortunate stewards of industry-defining franchises that have enormous potential and player demand."
🤔 Xbox CEO Asha Sharma and CCO Matt Booty released a candid memo, “Next 100 Days: XBOX Reset,” acknowledging both recent progress and significant long-term challenges
📈 The gaming division faces a severe hardware component crisis, with soaring costs and supply shortages limiting console production capacity
💰 Over-expansion and insufficient funding for key franchises have hindered Xbox’s competitiveness, necessitating a strategic reassessment of investments
👉 To drive future success, Xbox plans to streamline operations, rebuild its platform infrastructure, and refocus on exclusives, while signaling potential upcoming layoffs
After a successful Xbox Games Showcase, fan-pleasing decisions, and the reveal of a gorgeous Xbox Series X25 Limited Edition, the future of Microsoft’s gaming division was looking brighter than it’s been in years.
However, as we’ve come to expect with Xbox in recent years, the feel-good spirit it generated has all but been wiped out today, as new CEO Asha Sharma and CCO Matt Booty released a candid memo to staff, which has been published on Xbox Wire.
Titled ‘Next 100 Days: XBOX Reset’, the memo highlights the positive changes that have been made, but also the stark realities the gaming division is facing over the next few months and years.
“Our platform teams have already shipped more updates in the last 100 days than during the prior year combined. We now have more active partners on XBOX than ever before. Our Game Pass team set to work fixing our offering and after 8+ months of decline, our service has started to grow again. And through Player Voice, we have a 24/7 channel to hear directly from players, creators, and developers,” the memo reads.
“These results are early, but they demonstrate what is possible when we move faster, stay close to our community, and align behind a shared vision. We have made mistakes, and will continue to make them, but what matters is that we listen, learn, and adjust the course where needed. Remember, our fans are rooting for us.”
The component crisis
The memo outlines the difficulties Microsoft and other gaming companies are facing, including an insight into how the hardware component crisis is affecting Xbox.
“We are in a hardware component crisis. When I joined as CEO in February, the price we paid for console storage components was over 2x as high as we paid last fall. These costs have since doubled again. And as we plan for the 2027 holiday season, we expect another significant increase, taking us over 5x the prices we paid only two years earlier. Memory costs have followed a broadly similar trajectory. While the entire industry is facing a components crisis, we believe we have been impacted more greatly than many of our peers due to the choices we made over the last half decade. We are currently unable to make as many consoles as players want to buy, and we need a new business model and partnerships for hardware as we remain committed to [Xbox Project] Helix.”
A renewed focus on Xbox IP
Sharma and Booty also explain why Xbox is returning to exclusives, how the wave of studio acquisitions have over extended the team, and that a lack of investment has led to several games falling short of expectations.
“We expanded our studio system when we needed a pipeline of content to meet multiple strategies across subscription, streaming, and devices. In the process, we have found ourselves over extended as we executed on changing strategies in a landscape of more readily available content. We are the fortunate stewards of industry-defining franchises that have enormous potential and player demand, but we have not adequately funded them to compete and win. At the same time, as we saw this past weekend at Showcase, a reliable pipeline of first- and third-party exclusives and new IP are critical to our success. We need to reassess the balance between these and our investment priorities for the next 5 years.”
Layoffs loom ahead
Unfortunately, the memo hints at future layoffs, as the Xbox division shifts its priorities and focus.
“Our current platform infrastructure is not built for the battle ahead. Our systems are overly complex, spanning hundreds of dependencies, which hinders our ability to move fast. We’ve become too reliant on vendors to operate our systems and must become more self-reliant as an engineering culture to build for the future. We must increase the value we ship to players while decreasing the time it takes to do so. Going forward, we’ll evolve and rebuild our stack and look at capabilities across all of XBOX and potential M&A to help us win in hardware, PC, mobile, and streaming.
“For some of you, these realities will be surprising and even frustrating to discover. We won’t succeed by hiding hard truths, nor will we succeed by doing the same thing and expecting different results. Like the ‘everyday wins’ mentality from the first 100 days, we will sprint to make progress against hardware, content, experience, and services together.”
While some will see the memo as a grim reality check, the transparency provided to Xbox fans is refreshing. Sharma has been surprisingly honest so far, and being honest about Xbox’s failings and how it wants to improve will only help the brand return to a position of strength.
Adam Vjestica is The Shortcut’s Senior Editor. Formerly TechRadar’s Gaming Hardware Editor, Adam has also worked at Nintendo of Europe as a Content Marketing Editor, where he helped launch the Nintendo Switch. He also runs a retro gaming YouTube channel called Game on, boy! Follow him on X @ItsMrProducts.