Since mid-June, many gamers have grown conflicted feelings towards Asha Sharma’s Xbox Reset. Many were taken by surprise that someone who usurped from the Microsoft AI team, the CEO and her vice president, Matt Booty, put the gaming focus back on the green console.
Word later leaked that many partnered game studios, such as Compulsion Games and Double Fine Productions, will be given layoffs. Sharma responded to the public on Jul. 6 about the controversy and how their Xbox partners will move forward.
The 100-Day Xbox Reset
Sharma previously informed gamers about the Xbox Reset on Jun. 10. Rather than ignoring the ongoing problems in the video game industry, she discussed the challenges Microsoft is currently facing, including the cost of the Xbox Series X|S being affected by RAM hardware.
The June newsletter mainly focused on restructuring the gaming department. Sharma acknowledged the decline in game sales from the 2021-2025 sales report in her five-point plan:
“We will end this fiscal year at about 3% accountability margin, down year-over-year,” she explained. “Excluding Activision Blizzard King, over the past five years, we spent over $20 billion on ongoing investments in our content, platform, and hardware subsidy, but our annual revenue has declined nearly half a billion during that time. Going forward, this cannot continue.”
Point 4 goes into further detail on Xbox’s restructuring. The CEO recognized that Microsoft lacks exclusive titles in their gaming library. Previous Xbox head Phil Spencer tested the waters in late 2024, attempting to end the Console Wars with Sony’s PlayStation 5. The intention was to expand their first-party and third-party games to other consoles to boost sales.
Instead, Spencer’s approach dwindled Xbox Series X|S sales as PS5 and PC owners saw no reason to purchase one if Xbox titles were available on both systems. His leadership was also more compliant with Microsoft’s demands, resulting in multiple studio layoffs and game cancellations.
HiFi Rush developer Tango Gameworks, for example, was severed from Xbox without warning despite the rhythm-action RPG receiving overwhelmingly positive reception. The Perfect Dark reboot was cancelled with very little explanation, even when its studio, The Initiative, had presented the nearly finished version. From 2025 alone, Spencer and Microsoft laid off more than 15,000 workers from their gaming sector.
Gamers felt this same awakening when a leaked email was spread across the web. It mentioned that another mass layoff will take place on Jun. 30th, as a part of Asha Sharma’s Xbox Reset. While at first it pissed off most of the gaming community, some changed their tone when she addressed and gave a proper explanation on Jul. 6.
Sharma’s Response to Xbox Partner Layoffs
Unlike the 2025 layoffs, Asha Sharma did not attempt to sugarcoat the reality of Xbox’s reconstruction. Many were shocked to hear that after her first Xbox Showcase will be severing ties with selected Xbox Game Studio partners. Gamers quickly jumped to assumptions that the freshly appointed CEO was still under the influence of her previous Microsoft AI position.
The controversy blew into aggressive exaggerations that she and the soon-to-be separated partners cooperated to address the layoff stage of the Xbox Reset. Sharma emphasized how painful the process is as she stated, “These changes will directly affect people who have poured their creativity into building Xbox. Many joined us through acquisitions, while others were recruited here, or sought us out because they loved this industry and loved Xbox. Today’s decisions do not reflect on their talent or dedication.”
The mentioned studios in the July newsletter have come forward and confirmed that the recent layoffs are not due to ill content because Phil Spencer’s business model was deemed “not healthy.” Compulsion Games posted on their Bluesky account that they are grateful for the opportunity to work with Xbox Game Studios. They are currently in the process of becoming independent again:
Double Fine Productions’ founder, Tim Schafer, followed suit, appreciating that Microsoft granted them multiple opportunities, including their assistance in publishing Psychonauts 2:
Studios Ninja Theory and Undead Labs will be entering new ownership. Sharma’s letter said that both studios will be receiving funding to complete the upcoming Senua sequel and State of Decay 3. French developer Arkane Lyon is undergoing consultations with the Works Council for potential strategic options to continue development on Marvel’s Blade due to the local laws in the country.
Other Xbox Game Studios partners will be affected by staff reduction as Microsoft shifts investments into higher-priority projects. Activision, Blizzard, Bethesda/ZeniMax, King, and Mojang are confirmed to undergo this process of the Xbox Reset. Kojima Productions is confirmed to be safe as the studio continues developing the upcoming interactive horror experience, O.D., with Jordan Peele, according to Kotaku.
The Xbox Reset is continuing to receive criticism as TechCrunch reported that Microsoft cut nearly 5,000 jobs. 1,600 of 3,200 positions came from the planned layoffs for the 2027 fiscal year. The rest are from the company’s engineering department, which is led by Executive Vice President and AI adapter Amy Coleman.
