Microsoft Explores Restructuring Xbox for Sustainable Growth

WHO:

GeekWire - Microsoft CEO Satya Nadella acknowledged the company's challenges with Xbox.

Techmeme - Sources indicate Microsoft is considering restructuring its Xbox unit.

WHAT:

Digital Foundry - An internal memo from Asha Sharma and Matt Booty predicts that storage costs for Xbox will more than quintuple by the 2027 holiday season.

Digital Foundry - Asha Sharma stated that the price paid for console storage components has doubled between fall 2025 and February 2026, and has doubled again between February and June 2026.

GeekWire - Microsoft has been subsidizing Xbox rather than profiting from it.

Techmeme - Microsoft is exploring options to spin out or restructure its Xbox unit as a wholly-owned subsidiary or create a joint venture with other partners.

WHY:

Digital Foundry - Asha Sharma indicated that Xbox is uniquely vulnerable to rising component prices due to "choices we have made over the last half decade."

GeekWire - Satya Nadella stated that Microsoft needs to turn Xbox into a sustainable business.

HOW:

Digital Foundry - The memo discusses the need for a new business model and partnerships for hardware as Xbox remains committed to Helix.

Techmeme - Microsoft is considering various structural changes to its Xbox unit to address its struggles.

(UPDATED June 13, 2026 01:45 UTC)

A recent internal memo from Asha Sharma and Matt Booty reveals that storage costs for Xbox are expected to more than quintuple by the 2027 holiday season. Sharma noted that the price for console storage components has doubled twice in just over a year, highlighting Xbox's vulnerability to rising component prices due to strategic decisions made over the past five years. The memo emphasizes the necessity for a new business model and partnerships for hardware as Xbox continues its commitment to Helix.

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(UPDATED June 12, 2026 23:27 UTC)

Microsoft CEO Satya Nadella has acknowledged the company's ongoing challenges with Xbox, revealing that Microsoft has been subsidizing the gaming division instead of turning a profit. Sources indicate that the tech giant is exploring options to restructure its Xbox unit, potentially spinning it out as a wholly-owned subsidiary or forming a joint venture with other partners. Nadella emphasized the need for Microsoft to transform Xbox into a sustainable business, prompting these considerations for structural changes to address its struggles.