Microsoft has handed over the leadership of its Xbox and gaming division to AI expert Asha Sharma. She will replace long-time leader Phil Spencer. After years of focusing on PC and mobile gaming, the company now plans to refocus on console players.
The company confirmed that Phil Spencer, who has led the Xbox business since 2014 and became gaming CEO in 2022, is retiring. Xbox president Sarah Bond will also leave the company. Meanwhile, Xbox Game Studios head Matt Booty will take on the role of chief content officer and report directly to Sharma.
CEO Satya Nadella said in a blog post that Sharma, who previously worked at Instacart and Meta, was chosen for her consumer-product expertise and will now serve as chief executive of the gaming division.
Shift in Microsoft’s gaming strategy
In recent years, Microsoft expanded beyond traditional console users and targeted PC and mobile gamers. The company completed several major acquisitions, including the $69 billion purchase of Activision Blizzard. However, some long-time Xbox fans felt neglected. At the same time, growth in the mobile gaming market slowed, and Microsoft struggled to gain a strong foothold there.
According to industry tracker Obsidian, Microsoft has laid off more than 2,500 gaming employees since 2024. The company shut down studios such as Arkane Austin, The Initiative, and Tango Gameworks and canceled projects that had been in development for years. Additionally, bringing major Xbox titles to rival platforms from Sony and Nintendo upset some gamers.
Sharma now aims to change that situation. In a message to employees, she said Microsoft would recommit to its core Xbox audience and the developers behind its major franchises. She emphasized that console gaming remains central to the company’s identity.
Sharma’s experience and AI background
At Microsoft, Sharma led work related to AI models, developer tools, and intelligent agents. Last year, during rising interest in China’s DeepSeek model, she directed a team of about 100 engineers to quickly test the technology and release a version for Microsoft Azure customers within days.
Before returning to Microsoft two years ago as president of Core AI products, she served as chief operating officer at Instacart and played a key role in the company’s IPO. She also spent four years in product leadership roles at Meta and earlier worked in Microsoft’s marketing division until 2013.
Challenges facing Xbox
The leadership change follows a difficult decade for Xbox. Once a strong competitor to Sony’s PlayStation and Nintendo consoles, the brand weakened after the 2013 Xbox One generation. Since then, console sales have largely stagnated.
In a 2024 interview, Spencer said, “We’ve been selling consoles to roughly the same 200 million households worldwide.”
During his tenure, Spencer pursued major acquisitions, including Mojang Studios and Bethesda Softworks, followed by Activision Blizzard. The strategy aimed to strengthen the Game Pass subscription service and reduce reliance on console hardware.
However, including major titles in Game Pass instead of selling them separately at $70 affected high-margin game sales. Although the service initially attracted millions of users, growth later slowed, and Microsoft raised the monthly subscription price by about 50%.
Company finance chief Amy Hood has also pushed the gaming division to improve profitability. Executives recently set a target of about 30% “accountability margins,” a measure of operating profitability.
Microsoft shares closed nearly unchanged at $397.23 on Friday in New York.