Microsoft’s executive-mandated 30% profit target reportedly drove Xbox layoffs, studio shutdowns, and canceled projects
Microsoft’s Xbox gaming division has reported been under intense pressure to deliver 30% profit margins, nearly double the video game industry’s 2024 average of 17%, a target set by executives in the fall of 2023. This extremely lofty target has directly contributed to widespread layoffs, studio closures, and project cancellations across the sector.
According to a Bloomberg investigation reported on October 23, Chief Financial Officer Amy Hood introduced these “accountability margins,” Microsoft’s internal term for profit goals, as part of a broader corporate push to squeeze more efficiency from the gaming arm.
This benchmark, which S&P Global Analyst Neil Barbour described as “usually reserved for a publisher that is really nailing it,” is in direct contrast to the division’s historical performance. Leaked FTC documents from 2023 revealed that Xbox achieved only 12% profit margins in the first nine months of fiscal year 2022, with averages hovering between 10% and 20% over the prior six years.
The fallout from the aggressive target has been quite severe, resulting in over 10,000 job cuts in Microsoft’s operations in early 2023. This was further exacerbated by Microsoft's announcement of 1,900 layoffs within its gaming division in January 2024. During May 2024, Microsoft also closed down Arkane Austin, Tango Gameworks, Alpha Dog Games, and Roundhouse Games.
Later in September 2024, the gaming division was met with another 650 layoffs. In July 2025, Microsoft announced it would cut 9,000 jobs within its gaming division.
These measures also resulted in the cancellation of many high-profile projects, such as the Perfect Dark reboot, Rare’s Everwild, ZeniMax Online’s Project Blackbird, and Avalanche Studios’ Contraband.
In response to the report, an Xbox spokesperson stated that “success doesn’t look the same across every project or priority,” pretty much acknowledging the variable nature of gaming projects but offering little on the margin mandate.
Critics, including former Xbox executives, have pointed to Game Pass’s “weird inner tensions,” where subscriber growth often comes at the direct expense of retail revenue, exacerbating the profit squeeze.
To meet revenue goals, Microsoft bumped up the price of Game Pass Ultimate in recent months, though this move has drawn widespread backlash from subscribers, resulting in mass cancellations.
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