Microsoft's Xbox Division Plans Major Layoffs
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1 hour ago
0mins
Source: stocktwits
- Layoff Plans: Microsoft's Xbox division is expected to implement layoffs shortly after the fiscal year ends on June 30, although the exact scale remains undisclosed, marking the first major changes under new CEO Asha Sharma, highlighting the severe challenges the company faces.
- Deteriorating Financials: Over the past five years, Xbox has spent more than $20 billion on content and platform investments, yet its annual revenue has declined by nearly $500 million, resulting in an internal profitability measure dropping to 3%, indicating significant sustainability issues for the business.
- Strategic Reset: In a memo to employees, Sharma indicated that Xbox will “evolve and rebuild” its operational framework and may consider mergers and acquisitions to strengthen its position in hardware, PC, mobile, and streaming, suggesting a fundamental shift in strategy is underway.
- Competitive Market Pressures: Xbox is grappling with declining hardware sales, inconsistent game releases, and slowed growth in its Game Pass subscription service, prompting the company to cut costs over the past two years by closing studios and canceling projects, revealing its vulnerability in a rapidly changing market landscape.
Trade with 70% Backtested Accuracy
Stop guessing "Should I Buy MSFT?" and start using high-conviction signals backed by rigorous historical data.
Sign up today to access powerful investing tools and make smarter, data-driven decisions.
Analyst Views on MSFT
Wall Street analysts forecast MSFT stock price to rise
34 Analyst Rating
32 Buy
2 Hold
0 Sell
Strong Buy
Current: 403.410
Low
500.00
Averages
631.36
High
678.00
Current: 403.410
Low
500.00
Averages
631.36
High
678.00
About MSFT
Microsoft Corporation is a technology company. The Company develops and supports software, services, devices, and solutions. The Company’s segments include Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. The Productivity and Business Processes segment consists of products and services in its portfolio of productivity, communication, and information services. This segment primarily comprises: Office Commercial, Office Consumer, LinkedIn, and Dynamics business solutions. The Intelligent Cloud segment consists of server products and cloud services, including Azure and other cloud services, SQL Server, Windows Server, Visual Studio, System Center, and related Client Access Licenses (CALs), and Nuance and GitHub; and Enterprise Services, including enterprise support services, industry solutions and Nuance professional services. The More Personal Computing segment primarily comprises Windows, Devices, Gaming, and search and news advertising.
About the author

Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
- Stock Performance: Microsoft saw a 10.4% increase in May, significantly outperforming the S&P 500's 5.2% and the Nasdaq Composite's 8.4%, indicating strong market confidence in tech stocks, despite a 14% decline in 2026.
- Earnings Report Highlights: In its late April earnings report, Microsoft reported adjusted earnings per share of $4.27 on revenue of $82.89 billion, surpassing analyst expectations of $4.06 and $81.39 billion, reflecting strong performance in the AI sector.
- Market Reaction: Although the stock initially faced sell-offs post-earnings, it rebounded in May as investors returned, demonstrating confidence in Microsoft's future growth, particularly driven by advancements in AI technology.
- Macroeconomic Impact: As June began, Microsoft’s stock fell approximately 7.5%, primarily due to macroeconomic concerns and a strong jobs report, leading investors to worry about potential Federal Reserve interest rate hikes negatively impacting growth stocks.
See More
- Record IPO Size: SpaceX plans to sell 555,555,555 shares at $135 each on June 12, raising $75 billion and starting with a valuation of approximately $1.77 trillion, making it the eighth most valuable public company globally, showcasing its strong market appeal.
- Valuation vs Revenue: Despite its $1.77 trillion valuation, SpaceX reported a $4.9 billion loss in 2025 and generated $18.7 billion in revenue in 2022, resulting in a staggering price-to-sales (P/S) ratio of 93.6, indicating significant overvaluation risks compared to peers.
- Peer Comparison: SpaceX's P/S ratio is over 3.5 times that of Broadcom, which achieved 48% revenue growth and $9.31 billion in net income in its latest quarter, highlighting the extreme valuation of SpaceX's stock and the associated investment risks.
- Cautious Investment Advice: While SpaceX has promising prospects, investing at a high premium during its IPO could limit upside potential and increase the risk of a post-IPO sell-off, suggesting that investors should wait for market reactions before making decisions.
See More
- Meta Platforms Performance: Meta Platforms' stock has dropped over 25% from its all-time high, yet its advertising business saw a 33% year-over-year growth in Q1; however, concerns over skyrocketing AI expenditures have led to a valuation discount, with a current P/E ratio of 18, below the S&P 500's 22.2, indicating a potential investment opportunity.
- AI Investment Strategy: Meta has raised its capital expenditure guidance by $10 billion to $135 billion for AI investments, and despite limited returns thus far, its robust core advertising business suggests that the company still holds significant value during its transformation.
- Microsoft Growth Potential: Microsoft’s stock has also fallen over 25%, but its AI business grew at an impressive 123% year-over-year last quarter, with an annual run rate exceeding $37 billion, while its cloud unit Azure achieved a 40% year-over-year growth rate, showcasing its successful AI strategy.
- Market Valuation Comparison: Microsoft’s stock currently trades at a forward P/E of 21.3 times expected fiscal 2027 earnings, lower than the S&P 500, highlighting its advantage in AI monetization; unlike Meta, Microsoft has already successfully monetized its AI business, reflecting stronger market confidence.
See More
- Staggering IPO Size: SpaceX plans to sell 555,555,555 shares at $135 each on June 12, raising $75 billion and starting with a valuation of approximately $1.77 trillion, making it the eighth most valuable public company globally and highlighting its significant market impact.
- Valuation Risks: Despite projected revenue of $18.7 billion in 2025, SpaceX's price-to-sales ratio reaches 93.6, far exceeding that of companies like Broadcom, indicating that its stock may be overvalued and investors should proceed with caution.
- Lack of Profitability: With a projected loss of $4.9 billion in 2025, SpaceX's lack of profitability raises concerns about its valuation, suggesting that investing at a high premium could expose investors to greater risks, particularly with potential post-IPO volatility.
- Intense Market Competition: SpaceX's stock is expected to trade 4.7 to 26 times more expensive than the
See More
- Strong Ad Business for Meta: Meta's advertising revenue surged by 33% year-over-year in Q1, and despite its stock being down over 25% from its peak, the robust ad market indicates the company's competitive strength in this sector.
- Concerns Over AI Investments: Meta raised its capital expenditure guidance by $10 billion to $135 billion, and while its AI investments have yet to yield significant returns, market concerns about future profitability could impact investor confidence.
- Microsoft's AI Growth: Microsoft's AI business grew at an impressive 123% year-over-year in the last quarter, with an annual run rate exceeding $37 billion, and despite a similar stock decline of over 25%, its Azure cloud division's 40% growth contributed to an overall 18% growth for the company.
- Valuation Appeal: Meta's forward P/E ratio stands at 18 times, lower than the S&P 500's 22.2 times, indicating its stock is undervalued, while Microsoft's 21.3 times P/E ratio, despite market uncertainties, still positions it as an attractive investment option.
See More
- Layoff Plans: Microsoft's Xbox division is expected to implement layoffs shortly after the fiscal year ends on June 30, although the exact scale remains undisclosed, marking the first major changes under new CEO Asha Sharma, highlighting the severe challenges the company faces.
- Deteriorating Financials: Over the past five years, Xbox has spent more than $20 billion on content and platform investments, yet its annual revenue has declined by nearly $500 million, resulting in an internal profitability measure dropping to 3%, indicating significant sustainability issues for the business.
- Strategic Reset: In a memo to employees, Sharma indicated that Xbox will “evolve and rebuild” its operational framework and may consider mergers and acquisitions to strengthen its position in hardware, PC, mobile, and streaming, suggesting a fundamental shift in strategy is underway.
- Competitive Market Pressures: Xbox is grappling with declining hardware sales, inconsistent game releases, and slowed growth in its Game Pass subscription service, prompting the company to cut costs over the past two years by closing studios and canceling projects, revealing its vulnerability in a rapidly changing market landscape.
See More











