Microsoft's gaming business is in shambles. #Game addicts...

Nate

·a day ago

shared a link post in group #Gadgetsvia#The Most Important Thing

Microsoft's gaming business is in shambles. #Game addicts 🤪🎮 #Gadgets 

That assessment is based on a blistering memo issued on Wednesday by the company’s new gaming chief, Asha Sharma. The bottom line is that the gaming business—which generated about 8% of Microsoft’s revenue in fiscal 2025—is barely making any money. And excluding the giant gaming firm Activision, which Microsoft acquired in late 2023, Microsoft’s gaming revenue has fallen over the past five years. 

Let’s face it: The gaming industry is having a tough time. After surging during the pandemic, consumer spending on games globally has grown very slowly in the past five years, and barely at all for console games (like those that run on Xbox), according to data compiled by Matthew Ball. (To be sure, PC games—a business that is important to Microsoft—have grown at a faster rate, Ball’s data show.) 

And console makers like Microsoft are struggling with skyrocketing component prices, as Sharma pointed out in her memo. Microsoft’s console business has been a money-loser for a while, as former gaming chief Phil Spencer acknowledged back in 2022. As component prices are now several times what Microsoft was paying last year, its losses on console sales must be very steep right now. All of this raises the question of why Microsoft is still in the gaming business, at least the hardware part—and whether its $75 billion purchase of Activision was a smart move. 

So far there’s no sign CEO Satya Nadella is backing away from gaming. In an interview on Wednesday with The New York Times’ Hard Fork, he pointed out that gaming was an older division within Microsoft “than even Windows and Office.” He said Microsoft had to “build great games, build great hardware, but we’ve got to do it in an economically sustainable way.” 

Sharma’s memo sets the stage for some serious cost-cutting at the gaming division in the next few months. While that should help boost the business’s profit margin, it won’t necessarily lift growth. Whatever strategic benefits of staying in gaming Nadella might see, there’s an argument that Microsoft should spin off or sell the gaming unit. Does Nadella want his legacy blighted by clinging to a troubled business for too long?  

news.xbox.com/en-us/2026/..

news.xbox.com

Next 100 Days: XBOX Reset - XBOX Wire

Nate

·a day ago

shared a link post in group #Gadgetsvia#The Most Important Thing

Microsoft's gaming business is in shambles. #Game addicts 🤪🎮 #Gadgets 

That assessment is based on a blistering memo issued on Wednesday by the company’s new gaming chief, Asha Sharma. The bottom line is that the gaming business—which generated about 8% of Microsoft’s revenue in fiscal 2025—is barely making any money. And excluding the giant gaming firm Activision, which Microsoft acquired in late 2023, Microsoft’s gaming revenue has fallen over the past five years. 

Let’s face it: The gaming industry is having a tough time. After surging during the pandemic, consumer spending on games globally has grown very slowly in the past five years, and barely at all for console games (like those that run on Xbox), according to data compiled by Matthew Ball. (To be sure, PC games—a business that is important to Microsoft—have grown at a faster rate, Ball’s data show.) 

And console makers like Microsoft are struggling with skyrocketing component prices, as Sharma pointed out in her memo. Microsoft’s console business has been a money-loser for a while, as former gaming chief Phil Spencer acknowledged back in 2022. As component prices are now several times what Microsoft was paying last year, its losses on console sales must be very steep right now. All of this raises the question of why Microsoft is still in the gaming business, at least the hardware part—and whether its $75 billion purchase of Activision was a smart move. 

So far there’s no sign CEO Satya Nadella is backing away from gaming. In an interview on Wednesday with The New York Times’ Hard Fork, he pointed out that gaming was an older division within Microsoft “than even Windows and Office.” He said Microsoft had to “build great games, build great hardware, but we’ve got to do it in an economically sustainable way.” 

Sharma’s memo sets the stage for some serious cost-cutting at the gaming division in the next few months. While that should help boost the business’s profit margin, it won’t necessarily lift growth. Whatever strategic benefits of staying in gaming Nadella might see, there’s an argument that Microsoft should spin off or sell the gaming unit. Does Nadella want his legacy blighted by clinging to a troubled business for too long?  

news.xbox.com/en-us/2026/..

news.xbox.com