Xbox is reportedly preparing for mass layoffs as the company pushes forward with its next-generation console, Project Helix, which appears to be targeting a Christmas 2027 launch. The news comes amid rising hardware costs and a decline in revenue, according to internal memos and reports.
Rising Console Costs and Memory Shortages
The heads of Xbox have discussed the high cost of console components, particularly memory shortages that have forced price increases across the gaming industry. Xbox boss Asha Sharma recently acknowledged that Microsoft needs to pursue 'new business models' for Project Helix ahead of its expected 2027 launch, which has not been officially confirmed.
In a memo to employees made public, Sharma and Xbox Game Studios head Matt Booty highlighted that the costs for console storage components have doubled twice since last autumn and are expected to increase again as they plan for the 2027 holiday season. This suggests Microsoft intends to launch Project Helix by Christmas 2027.
Financial Challenges and Layoff Rumors
The memo celebrates Xbox's success, including over one billion players and record-breaking franchises in TV and film, such as Minecraft and Fallout. However, it also admits that Microsoft has been spending too much money with little return: '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.'
According to a Bloomberg report, Microsoft is planning layoffs to offset declining revenue. The exact scale is unknown, but rumors suggest around 1,000 people could be affected, with the cuts expected after June 30, the end of Microsoft's fiscal year. The Verge reports that the layoffs could also include the closure of one of Xbox's studios.
Past Layoffs and Management Criticism
Microsoft has laid off more than 6,000 employees from its Xbox division in the last couple of years. Last year's layoffs came after then-Xbox boss Phil Spencer boasted about the company's performance, leading to multiple game cancellations, including the Perfect Dark reboot. Despite poor management, no executives were let go, and Spencer retired from Microsoft in February.
The memo ends with a call to 'reset for a stronger Xbox and build the #1 gaming and entertainment company,' but critics argue that 'reset' may translate to further job losses.
