Microsoft Has Reportedly Considered Spinning Off Xbox

Microsoft has reportedly considering spinning off Xbox or restructuring the gaming division as a wholly owned subsidiary as it prepares to overhaul the business.

According to a report from The Information (via Reuters), the discussions have included several possible options for the future of Xbox. Microsoft is also said to have explored the possibility of creating a joint venture with external partners, which could make the gaming business easier to sell at a later date.

No final decision has been made, and a restructuring is not believed to be imminent. Microsoft did not immediately response to Reuters' request for comment.

Xbox could operate more independently within Microsoft

One possible model would see Xbox operate as a wholly owned Microsoft subsidiary, similar to the structure used for LinkedIN and software development platform Github.

Such a move would allow Xbox to remain under Microsoft's ownership while giving the division a more clearly defined operational structure. The reported discussions also suggest that Microsoft is examining longer-term options beyond its current approach to gaming.

The report arrives during a period of major change at Xbox under CEO Asha Sharma, who took charge of the gaming division in Feb 2026.

Microsoft reportedly plans to spend more on major Xbox franchises

Despite considering structural changes, Microsoft is reportedly preparing to increase spending on some of Xbox's most important franchises.

Sharma is said to be planning greater investment in premium game development, with a focus on accelerating new titles from major properties including Halo, Fallout and The Elder Scrolls.

Microsoft CEO Satya Nadella and CFO Amy Hood have reportedly approved the broader spending plan for the fiscal year beginning in July, although the final budget has not yet been locked down and could still change.

The report follows Xbox’s public business reset

The potential restructuring discussions come shortly after Xbox publicly outlined a major reset of its business.

In a memo published on Xbox Wire on June 10, Sharma and Xbox chief content officer Matt Booty acknowledged that the division had become overextended while pursuing multiple strategies across subscriptions, streaming, devices and first-party content.

The executives said Xbox expects to end the current fiscal year with an accountability margin of around 3%. Excluding Activision Blizzard King, the division said it had spent more than $20 billion over the past five years on content, platform investments and hardware subsidies, while its annual revenue declined by nearly $500 million over the same period.

Xbox also said it was facing a hardware component crisis, with the cost of console storage components expected to rise to more than five times the level paid two years earlier by the 2027 holiday season.

Xbox is also reportedly preparing for layoffs

The latest report follows separate claims that Xbox is preparing for significant layoffs and reductions to marketing and other budgets after Microsoft’s fiscal year ends on June 30.

The scale of the expected cuts remains unclear. Previous reporting has suggested that the restructuring could potentially include changes to Xbox’s studio lineup or even the closure of a studio.

Xbox has not announced any plans to spin off the division, sell the business or restructure it as a separate subsidiary. For now, the reported discussions appear to be part of a broader effort to evaluate the future of the gaming unit as Microsoft attempts to improve its financial performance and sharpen its strategy.

FAQ

Is Microsoft spinning off Xbox?

Microsoft has reportedly considered spinning off Xbox as one of several possible options, but no final decision has been made and a restructuring is not considered imminent.

Could Xbox become a separate company?

One option reportedly under consideration would restructure Xbox as a wholly owned Microsoft subsidiary, similar to LinkedIn or GitHub. Microsoft has also reportedly explored creating a joint venture with external partners.

Why is Microsoft restructuring Xbox?

Xbox has acknowledged financial and operational challenges, including declining annual revenue, rising console component costs and an overextended studio system. The division has announced a broader business reset under CEO Asha Sharma.

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