Microsoft has announced a significant overhaul of its Xbox and overall gaming operations. Phil Spencer, a veteran who has led the Xbox business since 2014 and was appointed gaming CEO in 2022, is stepping down. In his place, the tech giant is bringing in AI executive Asha Sharma to spearhead its gaming division, signaling a renewed commitment to console players after a period focused heavily on mobile and PC markets.
The leadership changes extend beyond Spencer’s retirement. Xbox President Sarah Bond will also be leaving Microsoft. Meanwhile, Matt Booty, previously the chief of Xbox game studios, will transition into the role of chief content officer, reporting directly to the new Gaming CEO, Asha Sharma.
Asha Sharma’s appointment is notable given her background. Microsoft CEO Satya Nadella highlighted her extensive consumer expertise, cultivated through previous leadership positions at companies like Instacart and Meta Platforms. Her selection reflects Microsoft’s strategic pivot in the gaming sector.
In recent years, Microsoft pursued an aggressive strategy to expand its gaming audience beyond traditional console users, targeting PC and mobile gamers. This involved substantial acquisitions, including the massive $69 billion purchase of Activision Blizzard. However, these moves, among others, sometimes left long-standing Xbox enthusiasts feeling overlooked. Concurrently, growth in the mobile gaming market slowed, and Microsoft’s initiatives in this space didn’t always meet expectations.
The gaming division has also seen significant restructuring, with Microsoft implementing over 2,500 layoffs since 2024, as reported by industry tracker Obsidian. Several studios, including Arkane Austin, the Initiative, and Tango Gameworks, were shut down, and numerous games that had been in development for years were canceled. Furthermore, decisions to release major console titles on rival platforms from Sony and Nintendo caused frustration within the Xbox community.
Asha Sharma is keen to reverse these trends and reinvigorate the brand.
“Our priority is to recommit to our loyal Xbox fans and players, those who have supported us for the past 25 years, and to the dedicated developers who create the vast worlds and experiences enjoyed by players globally,” Sharma stated in an internal email to staff. “We will honor our heritage by renewing our focus on the Xbox console, which has been fundamental to our identity.”
Sharma’s expertise lies in artificial intelligence, where she has been instrumental in overseeing Microsoft’s work with various AI models, and developing AI agents, applications, and developer tools.
A notable achievement from last year involved her leadership during a period of intense interest in China’s DeepSeek AI model. Sharma mobilized a team of approximately 100 engineers who worked tirelessly to meet Nadella’s urgent request for a rapid response, resulting in the swift testing and release of a version for Microsoft’s Azure cloud customers within just a few days.
Before rejoining Microsoft, Sharma served as chief operating officer at Instacart, where she played a pivotal role in the company’s IPO and its emphasis on profitability. Her career also includes four years in product leadership roles at Meta. Earlier, she had a two-year stint in marketing at Microsoft, which she left in 2013.
She returned to Microsoft two years ago, taking on the role of president of Core AI product.
Microsoft shares closed marginally changed at $397.23 on Friday in New York following the announcement.
These organizational changes come after what has been a challenging decade for Xbox. Following years of robust competition with Sony’s PlayStation and Nintendo, Spencer himself conceded that the 2013 Xbox One “lost the worst generation to lose.” Since then, Xbox console sales have struggled to gain momentum.
“We’ve consistently been selling consoles to the same 200 million global households,” Spencer observed in an interview with Bloomberg Businessweek in 2024, highlighting the lack of significant market expansion.
Spencer, who started at Microsoft as an intern in 1988 and joined the Xbox team in 2001, led numerous acquisitions aimed at expanding the gaming business. This included a $10 billion investment in Mojang Studios, creators of Minecraft, and Bethesda Softworks, even before the monumental Activision deal brought popular franchises like Candy Crush and Call of Duty under Microsoft’s wing.
The strategic intent behind these acquisitions was to bolster the Game Pass subscription service, potentially shielding Xbox from the inherent risks of the console hardware business. However, offering premium titles on Game Pass, rather than selling them at a typical $70 price point, inadvertently reduced sales of higher-margin games such as Call of Duty.
While this strategy initially attracted a large subscriber base, its growth eventually slowed, prompting Microsoft to increase the monthly Game Pass price by 50 percent.
Bloomberg has also reported that Amy Hood, Xbox’s chief financial officer, has consistently pushed the Xbox division to enhance its profitability. More recently, executives established an ambitious target of 30 percent “accountability margins,” a metric used internally for profitability goals.