2025 has proven to be a turbulent period for the Xbox brand. The year has seen significant challenges, from widespread layoffs and multiple price increases for both its consoles and Game Pass subscriptions, to ongoing controversy surrounding Microsoft’s association with Israel. A recent report by Jason Schreier at Bloomberg sheds light on the internal pressures at Xbox, pointing to a demanding profit goal as the core reason behind these decisions.
According to the report, for the past two years, high-level executives have enforced an ambitious “across-the-board profit margin goal of 30 percent.” This new financial target was reportedly set by Amy Hood, Microsoft’s chief financial officer, whose team has apparently taken on a more prominent role in guiding the gaming division recently.
To put this into perspective, industry estimates from S&P Global Market Intelligence indicate that the average profit margin for the entire video game sector has hovered between 17 percent and 22 percent since 2018. Xbox’s own margins typically fell within the 10 to 20 percent range.
The Bloomberg report also highlights that the mandate for Xbox’s first-party games to be available on the Xbox Game Pass subscription service has negatively impacted overall software sales. However, Xbox has implemented a “member-weighted value” credit system. This system, as described in the report, is calculated based on various factors, such as the total number of hours Game Pass subscribers spend playing a particular title.
In a shift in strategy, Xbox has begun releasing some first-party titles on rival consoles. Games like Indiana Jones and the Great Circle, Sea of Thieves, and Forza Horizon 5 have recently launched on PlayStation 5, reportedly achieving considerable success in sales.
Sources familiar with the situation informed Bloomberg that, moving forward, games that are either inexpensive to develop or are expected to generate substantial revenue will likely be prioritized over more speculative projects. In pursuit of this 30 percent profit objective, Xbox has recently canceled several projects. Among the most notable cancellations are Rare’s Everwild, The Initiative’s Perfect Dark, and Zenimax’s Project Blackbird—each of which had been in development for nearly a decade.
Microsoft’s upcoming earnings report is slated for October 29. Prior to that, the next installment in Xbox’s flagship Halo franchise is anticipated to be revealed on October 24 as part of the Halo World Championships.
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