Xbox Studios released cross-platform PS5 games to meet Microsoft's steep 30% profit margin

Bloomberg initially reported that Microsoft CFO Amy Hood set a 30% profit margin target for its Xbox Game Studios. While the company denied that claim, Obsidian Entertainment CEO Feargus Urquhart suggests otherwise. A new article also reveals that cross-platform Xbox games launched on the PS5 to meet the lofty goal.

Obsidian is one many Xbox Studios facing setbacks

Jason Schreier spoke with the Obsidian boss about a hectic period for its developers. The studio released Avowed, The Outer Worlds 2, and Grounded 2 in the same year. Unfortunately, only the latter bug-infested survival title has met expectations for sales. Urquhart has concerns, but thinks that by experimenting, the company can produce more success stories.

The CEO hopes to trim long development cycles for Xbox games, which frustrates players and inflates budgets. Outsourcing parts of a project to other studios can improve efficiency. Urquhart also isn’t opposed to reusing tech from past titles when appropriate.

Even with a strategy to cut costs, Urquhart admits, “maybe where we are going to be from a profitability standpoint isn’t going to be 30%.” Despite Amy Hood’s denial, it seems some Xbox Studios are held to this high standard. A 17-22% target is a more realistic benchmark in the gaming industry.

Microsoft bought Obsidian in 2018, but would continue to stockpile acquisitions at a blistering pace. Critics believe it invested recklessly. Analysts saw price increases and the closure of some Xbox Studios as proof of poor decision-making. Another questionable shift mentioned in the Bloomberg article was to embrace cross-platform games.

Many Xbox exclusive games are now available on the PS5, with Forza Horizon 6 and Fable headed to the console in 2026. The move may help achieve the 30% profit margin objective, but it also contributed to the downfall of the Series X|S. Some fans now see fewer reasons to stay loyal to the ecosystem. That could spell doom for Microsoft’s gaming interests in the long term.