Xbox is bracing for a painful summer. Speculation among Microsoft Gaming employees points to significant workforce reductions coming in July, just months after new CEO Asha Sharma took the reins and began reshaping the division’s leadership and strategic direction.

Sharma, who was appointed Executive Vice President and CEO of Microsoft Gaming on February 23, 2026, has moved quickly to signal that the status quo is over. In internal communications issued in April and May, she told staff the gaming division would need to make “hard choices” and “tough decisions” to revitalize growth.

A new regime takes shape

Sharma’s arrival marks the first major leadership change at Xbox in several years. She replaced Phil Spencer, the long-tenured executive who became the public face of the Xbox brand. Spencer retired from the role, handing Sharma a division that has struggled with persistent challenges around revenue growth and profitability.

One of Sharma’s first moves was a leadership overhaul. She brought in several executives from her previous role at Microsoft’s CoreAI division, effectively installing a new inner circle with experience in a different part of the company’s business.

The restructuring has been methodical. April brought the warnings. May brought the new faces at the top. And employee discussions suggest July will bring the layoffs themselves.

Microsoft has not officially confirmed any workforce reductions.

What this means for the gaming workforce

For Xbox employees, the next few weeks are going to be anxious ones. The internal speculation about July layoffs has been circulating since at least April, which means staff have been living with uncertainty for months.

The scale of potential cuts remains unclear. Previous Microsoft Gaming layoffs affected thousands of workers, particularly at Activision Blizzard studios absorbed during the acquisition. Whether this round targets specific studios, corporate functions, or a broader cross-section of the division will reveal a lot about Sharma’s strategic priorities.