Okay, so things aren’t looking amazing over at Xbox right now. I heard from the CEO, Asha Sharma, that they’re down about 3% in revenue compared to last year, and there’s talk of layoffs coming. Apparently, Jez Corden over at Windows Central has been digging into why, and it sounds like a big part of the problem is that while some of their games are doing really well, they’re having to cover the losses from other titles that just aren’t selling as much. Basically, the hits aren’t quite covering the misses, and it’s hitting their bottom line.
Xbox saw strong success with games like Forza Horizon, Age of Empires, Microsoft Flight Simulator, Sea of Thieves, Grounded, and The Elder Scrolls 4: Oblivion Remastered. However, titles including Avowed, Kiln, Keeper, South of Midnight, Hellblade 2: Senua’s Saga, Forza Motorsport, and The Outer Worlds 2 didn’t sell as well as Microsoft hoped. According to reports, this is based on both sales numbers and how many people played the games through the Game Pass service.
As a gamer, it’s a little disappointing to look back and see some titles that just didn’t quite hit the mark. I’m thinking of games like Ninja Gaiden 4, Minecraft Legends, and even Minecraft Earth. Bleeding Edge, Battletoads, Towerborne, and Ara: History Untold also felt like they missed their potential, and honestly, there were a few others that didn’t quite land either.
In addition to the games that have been discontinued, several other projects – including Perfect Dark, Everwild, and Zenimax’s Project Blackbird – represent significant investments that haven’t yielded positive results. Before it closed, the development of Perfect Dark by The Initiative was described as a major financial burden for Xbox. Undead Labs also appeared to be contributing to these losses, but they now seem to be making progress with the recent reveal of gameplay from State of Decay 3.
One major factor was lengthy development times. For example, creating the new Fable game required Playground Games to significantly modify their existing ForzaTech engine – originally designed for racing games – to handle a large role-playing game. They even considered using Unreal Engine instead. Ultimately, they stuck with ForzaTech because of the team’s expertise and available support. This decision could also save Microsoft money in the long run by reducing licensing fees associated with external game engines.
So, about that 30% profit Xbox needs to make – it’s not as simple as it sounds. Apparently, that’s an average across all their teams and studios. Some of the bigger studios actually aim for a 40% profit margin to help cover losses from other games or divisions. Basically, they’re balancing things out to make sure the whole Xbox operation stays in the green.
Microsoft is currently facing difficulties obtaining sufficient memory and storage chips needed to manufacture more Xbox consoles. Reports indicate component costs have increased significantly, resulting in a loss of several hundred dollars on each Xbox Series X or S console they sell.
A recent report suggests that Xbox may close some of its game development studios due to the company’s current performance. Although Microsoft hasn’t confirmed anything, these closures and related job cuts are expected soon after the end of June.
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2026-06-12 17:12