Microsoft’s gaming division is in deeper trouble than it seems. Despite spending nearly $100 billion on high-profile acquisitions like ZeniMax and Activision Blizzard, Xbox is now saddled with financial targets described internally as “utterly unrealistic.” This, according to insiders, is driving ongoing layoffs, cancellations, and a growing sense of uncertainty within the division.
The recent layoffs across multiple studios paint a bleak picture. 
Turn 10, known for Forza Motorsport, reportedly lost over 70 employees and has now been relegated to support duties for Forza Horizon. Rare’s long-teased Everwild is canceled. The Initiative, built from scratch to reboot Perfect Dark, has been completely shut down. Even ZeniMax Online’s promising new MMORPG was shelved – despite positive internal feedback from Xbox boss Phil Spencer.
Industry voices like Windows Central’s Jez Corden and The Verge’s Tom Warren suggest that the pressures stem from financial demands post-Activision acquisition. Without it, Xbox revenue would have significantly dropped. But with it, Microsoft is facing losses – including a reported $1.8 billion hit after the ABK deal finalized – and the once-lauded Game Pass model hasn’t delivered the returns once promised.
The underlying issue isn’t just about money. It’s strategic missteps and disconnection from gamers. For many, the Xbox Series S/X was supposed to be a fresh start. Instead, it’s become a symbol of fragmented priorities. With Game Pass trying to mimic Netflix’s model and most new titles either delayed, underwhelming, or scrapped, fans are abandoning ship. The platform’s value is increasingly in question as first-party content falters and player trust erodes.
Meanwhile, the gaming community is left wondering what’s next. With studios shutting down, titles disappearing, and Xbox’s future looking more service-based than hardware-focused, the question isn’t whether Microsoft needs a new strategy – it’s whether they even have time left to find one.