Nadella Backs Xbox Cuts as 268 More Staff Let Go Now

On September 27, 2026, Microsoft CEO Satya Nadella told the Sources Podcast that the streamlining work led by Xbox chief Asha Sharma is "great to see," even as 268 additional employees were cut this week. The latest round of layoffs moves Microsoft closer to a publicly stated target to reduce Xbox headcount by 3,200 before the end of the fiscal year.

Those 268 job losses follow roughly 1,600 cuts announced about two months earlier, and Xbox has made clear the reductions are not finished. Xbox has set a target to reduce headcount by 3,200 employees before the end of the fiscal year.

Nadella framed gaming as part of Microsoft’s core DNA in the same interview, saying, "I always say at Microsoft, we’ve had gaming, in fact, I think we’ve had gaming even before, as a category, before Windows. That’s right, Flight Sim. And so, to me, it’s in the same core DNA, like developer tools and knowledge work. And I feel fantastic about the IP we have right now, which is, if I look at the studios, the IP portfolio we have, and our ability to then take that and produce great games going forward, I feel fantastic."

He continued, "There’s some amount of streamlining the team is doing, and Asha is doing, which is great to see. And then we have to invent the right sustainable business model that allows us to deliver gaming to more and more people." Nadella repeated the division’s aim to be both a publisher and a platform provider across PC and Xbox, and noted that Sharma and her team have said Xbox will return to growth in the next fiscal year.

That growth target traces back to a constraint Nadella has made clear before: after 25 years of investment, Xbox must become a sustainable business. Observers have linked that mandate to rumours of other options for the unit, including a potential sale or a joint venture, should sustainability not be achieved.

Microsoft and Xbox leadership remain publicly committed to the restructuring and to shipping new games while managing costs, even as the division contends with ongoing headwinds such as the component crisis.