The Xbox division at Microsoft is reportedly going through a difficult period, beset with layoffs and, perhaps more surprisingly, financial targets that could be detrimental to its long-term health, according to insiders. This is reportedly due to increasing pressure from above. Xbox has been given an “utterly unrealistic financial target,” which could impede the division.
Windows Central’s Jez Corden reported the insider scoop on X, where he stated that Microsoft’s CFO Amy Hood had given the Xbox division an “utterly unrealistic” financial target. Corden added that the expectations could “continue hurting the division.” This news comes in the wake of a massive round of layoffs at Microsoft, which have hit Xbox and its studios pretty hard.
The Verge’s Tom Warren joined the conversation and pushed back on the “unrealistic” label, stating, “I don’t think it’s unrealistic, it’s just the reality of the Xbox business after the ABK acquisition. Without that deal, Xbox revenue would be down, and the Game Pass gamble hasn’t paid off yet.”
The acquisition in question is Microsoft’s $68.7 billion procurement of Activision Blizzard, which supercharged the company’s portfolio with IPs such as World of Warcraft, Diablo, DOOM, and Call of Duty.
To put things into perspective, Microsoft’s total revenue for the fiscal year of 2022 was $198.27 billion, with the Xbox division contributing only $16.23 billion in the same period. In 2024, Microsoft’s Xbox revenue was $15.7 billion, a steep decline from the previous fiscal year’s $21.5 billion. Insiders believe that the decline is due to fewer Xbox hardware sales, as Microsoft sold only 2.7 million units while Sony sold 4 million PS5 units in the same year.
Xbox Game Pass, meanwhile, hit 34 million subscribers in early 2024. As of mid-2025, it’s reported that the subscription service has signed up more than 35 million subscribers. This is well below Microsoft’s goal of hitting 100 million users by 2030.
While Game Pass generated $4.7 billion in revenue in 2024 and is projected to generate around $5.5 billion by 2025, the growth is not expected to offset the broader financial investments made by Microsoft.
It’s apparent that financial pressures have been severe, considering Microsoft laid off 9,100 employees, affecting AAA studios: Turn 10, Rare, Romero Games, and The Initiative.
Xbox Game Studios is undergoing an aggressive restructuring period, and the road ahead seems anything but smooth. The tremors from the aftermath of the layoffs have been felt throughout the gaming industry and are also visible on LinkedIn where former employees have announced that they were laid off, often unexpectedly.