Microsoft bets on cloud and cross-platform future for Xbox while brushing off 30% profit margin rumors
Microsoft has denied recent reports claiming that it imposed a strict 30% profit margin on its Xbox gaming division. The company said it aims high, but didn’t provide an exact profit margin figure.
Microsoft pushed back against the claims in a new CNBC interview, where the company discussed the challenges and rumors that arose over the past year, including numerous layoffs and project cancellations.
Previously, a Bloomberg story in October reported that Microsoft Chief Financial Officer Amy Hood has set a 30% profit goal as part of “accountability margins,” with Xbox in particular feeling the pressure. Many industry insiders whispered similar information, which was acknowledged as the primary driver of Microsoft’s cost-cutting measures, including scrapping various projects and reducing headcount.
The 30% figure stood out because it’s well above typical profit margins in the gaming industry, which are reported to range from 17% to 22%. Xbox’s own margins were 12% in 2022, according to earlier documentation.
Microsoft spoke to CNBC directly and said, “While the company does set ambitious goals, the reported 30% profit margin target was incorrect.” Xbox’s hurdles have been piling up, with over 9,000 employees affected across multiple rounds of layoffs.
Numerous big-budget projects were axed in the wake of Microsoft’s layoffs, including The Initiative’s Perfect Dark Reboot, Rare’s long-in-development Everwild, and ZeniMax Online’s sci-fi MMO Project Blackbird.
Furthermore, Xbox sales have taken a nosedive, with a whopping 70% drop in November, putting the company far behind Sony’s PlayStation 5 and Nintendo’s Switch 2 in hardware sales.
Xbox also announced last week that it wouldn’t be implementing the Xbox Wrapped feature this year due to budget constraints. Reports claim that Xbox is shifting funds toward its 25th anniversary celebration in 2026. However, it still shows that the company is under financial pressure.
Despite all these challenges and setbacks, Microsoft is still pursuing and pivoting towards cloud gaming and cross-platform gaming, Xbox Game Pass subscription, and is forgoing exclusivity to allow more players to join Xbox’s gaming endeavors, ranging from PCs, handhelds like the Rog Ally and Ally X, mobile devices, and even automobiles.
As for Bloomberg, it’s not yet clear if the news outlet will retract its statement, update its report, or provide further information regarding the matter.
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