Microsoft considers spinning out Xbox into subsidiary

Microsoft is weighing options to restructure its Xbox division, including turning it into a wholly-owned subsidiary. The move aims to boost the business performance of the gaming unit.

A report from The Information indicates Microsoft has not ruled out reorganising Xbox or creating a joint venture with partners. No immediate changes are planned, but such steps remain under consideration to improve Xbox as a business.

The division is also expected to accelerate development of new games from its owned franchises. Fallout and The Elder Scrolls have been highlighted as particular priorities under new CEO Asha Sharma.

Additional reports mention potential staff reductions and marketing budget cuts starting in July. Sharma has publicly noted that Xbox is not currently in a healthy spot financially.

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Microsoft announced major layoffs across its gaming division and other units on July 6, 2026. The cuts total 4,800 positions, or 2.1 percent of the global workforce. Xbox is divesting several studios as part of the reset.

Xbox's new chief executive Asha Sharma plans to speed up development of major franchises such as Halo and Fallout. Resources will be shifted from lower-performing areas while overall budgets stay flat. Microsoft leaders have approved the changes for the coming fiscal year.

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