Phil Spencer steps down from Xbox after 12 years, AI exec Asha Sharma takes over

Major shake-up at Xbox as longtime leader Phil Spencer steps down after over a decade. Asha Sharma, from Microsoft's AI division, takes over as Gaming CEO with bold plans to refocus on console roots and reject "soulless AI slop" in games.

Phil Spencer has retired as CEO of Microsoft Gaming after more than a decade leading Xbox Asha Sharma, previously president of Microsoft's CoreAI product, has been promoted to CEO of Microsoft Gaming, while Xbox president Sarah Bond is also leaving the company. Spencer will remain in an advisory role through the summer to ensure a smooth transition.

Why Spencer decided to step down

Spencer informed Microsoft CEO Satya Nadella last fall about his intentions to retire.. "Last fall, I shared with Satya that I was thinking about stepping back and starting the next chapter of my life," Spencer said in an email to employees. He emphasised that Xbox "deserves a thoughtful, deliberate plan for the road ahead" given its importance as both a business and community.

The 38-year Microsoft veteran has been with the Xbox brand since 2001, helping launch the original console. He became head of Xbox in 2014 after the Xbox One launch and served as Microsoft Gaming CEO since 2022. Spencer announced his retirement publicly on X, reflecting on his journey from a 1988 intern to industry leader.

It’s rare in life to know when a chapter is closing, but after 38 years at Microsoft, that moment has arrived for me. I’ve made the decision to retire and begin the next chapter of my life. It’s a milestone that’s given me a chance to reflect on the incredible journey I’ve been…
— Phil Spencer (@XboxP3) February 20, 2026

What Asha Sharma plans for Xbox's future

Sharma outlined three core commitments in her first email to staff as CEO. First, "great games" that feature "unforgettable characters, stories that make us feel, innovative game play, and creative excellence." She promised to empower studios, invest in iconic franchises, and back bold new ideas while taking calculated risks.

Second, the "return of Xbox" by recommitting to core fans who have invested in the platform for 25 years. Sharma specifically mentioned celebrating Xbox's roots with a renewed commitment to console gaming, which "connects us to the players and fans who invest in Xbox."

Third, the "future of play" through new business models and ways to engage with Xbox's iconic teams, characters, and worlds. However, Sharma made clear her stance on artificial intelligence: "As monetisation and AI evolve and influence this future, we will not chase short-term efficiency or flood our ecosystem with soulless AI slop. Games are and always will be art, crafted by humans."

Matt Booty's expanded role and team changes

Matt Booty, former head of Xbox Game Studios, has been promoted to Chief Content Officer for Microsoft Gaming. Sharma specifically highlighted this promotion as part of her commitment to great games, noting that Booty "understands the craft and the challenges of building great games" and has earned developer trust across the industry.

Booty expressed enthusiasm about working with Sharma, saying their early conversations centred on "her commitment to making great games and the role that plays in our overall success." He noted that Sharma asks questions, pushes for clarity, and wants decisions grounded in player and developer needs.

Sarah Bond's departure represents another significant change, though specific reasons for her exit weren't detailed beyond her leaving the company entirely.

The challenges Spencer faced during his tenure

Spencer's leadership coincided with major Xbox milestones including Game Pass success and the Activision Blizzard acquisition. However, his tenure also included game delays, cancellations, layoffs, and studio closures. The Xbox Series X/S underperformed compared to PlayStation 5 and Nintendo Switch, pushing Microsoft to make previously exclusive games multiplatform - including bringing Halo to Sony's PlayStation.

Industry reports suggest Xbox faced pressure to achieve unusually high profit margins, potentially contributing to console and subscription price increases. These challenges highlight the difficult position Xbox occupied in the competitive console market during Spencer's final years as leader.

Frequently Asked Questions

Who is the new CEO of Microsoft Gaming?

Asha Sharma, previously president of Microsoft's CoreAI product, has been promoted to CEO of Microsoft Gaming effective February 20, 2026.

Why is Phil Spencer retiring from Xbox?

Spencer told Microsoft CEO Satya Nadella last fall that he was considering stepping back to start a new chapter in his life, aiming for a thoughtful transition after 38 years at Microsoft.

What are Asha Sharma's plans for Xbox?

Sharma outlined three commitments: creating great games, recommitting to core Xbox fans and console gaming, and exploring new business models while rejecting 'soulless AI slop' in favour of human-crafted games.

What is Matt Booty's new role at Xbox?

Matt Booty has been promoted from head of Xbox Game Studios to Chief Content Officer for Microsoft Gaming, recognising his understanding of game development and industry relationships.