Microsoft’s long-time gaming leader Phil Spencer is stepping down after 38 years with the company. His retirement comes as the Xbox division faces growing competitive pressure.
Leadership transition
On Friday, CEO Satya Nadella informed employees that Spencer had already decided to retire last year. Since then, Microsoft has been planning a smooth leadership transition. Nadella thanked him for his “excellent leadership and partnership.”
The move follows several high-profile exits in 2025. These include business development chief Chris Young and GitHub CEO Thomas Dohmke. Earlier this month, security head Charlie Bell also shifted into a different role.
Gaming business under pressure
Microsoft’s gaming unit is currently going through a challenging period. Video-game revenue fell around 10% year-over-year in the December quarter. At the same time, total company revenue still grew by nearly 17%.
In January, the company recorded an impairment charge tied to the gaming business.
Microsoft made a huge push into gaming with its $75 billion acquisition of Activision Blizzard in 2023. The company also expanded cloud-based Call of Duty releases. Even so, recent Xbox consoles have struggled to compete with Sony’s PlayStation and Nintendo’s Switch. As a result, several game studios were shut down.
Spencer’s legacy at Microsoft
Spencer became head of Xbox in 2014 after leading Microsoft’s internal game studios. Under his leadership, the gaming business nearly tripled in size. Major acquisitions, including Activision Blizzard, played a key role in that growth.
He also supported the purchase of Mojang, the developer behind Minecraft.
When Nadella became CEO in 2014, Sony was outselling Xbox consoles. Some investors even suggested separating the consumer gaming business. In a 2020 interview, Spencer explained that he convinced Nadella to combine hardware, software, and game development into one unified organization.
Asha Sharma takes charge
Asha Sharma will now take over as CEO of Gaming and will report directly to Nadella. She joined Microsoft in 2024 after working at Instacart.
Until recently, Sharma served as president of product in Microsoft’s Core AI division, led by former Meta executive Jay Parikh. Earlier in her career, she led product and engineering teams at Meta and also held marketing roles at Microsoft.
Vision for the future of Xbox
In a message to employees, Sharma promised renewed support for Xbox players, fans, and developers worldwide. She acknowledged that AI and monetization will shape the future of gaming. However, she emphasized that Microsoft will not prioritize short-term profit or flood the platform with low-quality AI-generated content.
According to her, games will always remain a human-created art form supported by advanced technology.
She also reaffirmed Microsoft’s commitment to console gaming. The company launched the original Xbox back in 2001.
Other leadership changes
Matt Booty, head of Microsoft’s gaming studios, will report to Sharma as executive vice president and chief content officer. Meanwhile, Xbox president and COO Sarah Bond is leaving the company.
Both Bond and Spencer will assist Sharma during the transition period.