Xbox is dying a slow death, and now it's facing huge layoffs as revenue declines

Saddled with plateauing subscriptions and falling revenue, Microsoft's Xbox unit reportedly faces sweeping layoffs.

News of the cuts was first reported by Bloomberg on Wednesday from sources that said the job reductions would mark the first major restructuring overseen by CEO Asha Sharma, who took the helm in February.

The layoffs come as the gaming giant looks to rein in costs and revive growth after struggling to regain momentum in an increasingly competitive market.

An internal email from Sharma outlined the company's efforts to revive Xbox and the need to rebuild its platform infrastructure and portfolio amid mounting financial pressures.

Hours later, Sharma published the same message on Xbox's website under the title Next 100 Days: Xbox Reset.

In the letter, Sharma said Xbox's operating margins had shrunk to just 3 percent despite the company investing more than $20 billion over the past five years in content, platforms and hardware subsidies.

Even after that spending spree, annual revenue had fallen by nearly half a billion dollars over the same period, underscoring the scale of the challenge facing the gaming giant.

Xbox has spent years betting its future on subscriptions and cloud gaming, but the strategy has failed to stop falling console sales and a drought of must-have titles.

Addressing the future of the company, Sharma wrote: 'For some of you, these realities will be surprising and even frustrating to discover.

'We won't succeed by hiding hard truths, nor will we succeed by doing the same thing and expecting different results.

'Like the 'everyday wins' mentality from the first 100 days, we will sprint to make progress against hardware, content, experience, and services together.'

Sharma also acknowledged that Xbox's biggest franchises had been underfunded despite their popularity.

'Xbox has industry-defining franchises that have enormous potential and player demand, but we have not adequately funded them to compete and win,' she wrote.

At the same time, she stressed that a 'reliable pipeline of exclusive games and new IP are critical to success,' adding that the company needed to 'reassess the balance between these and our investment priorities for the next five years.'

In recent years, Xbox has released many of its games on rival platforms, including Sony's PlayStation and Nintendo, helping titles such as Indiana Jones and Forza Horizon reach larger audiences. 

But the move away from exclusivity may have weakened the appeal of Xbox hardware in the process.

The exact scale of the layoffs remains unclear, but they are expected to happen close to the end of Microsoft's fiscal year on June 30. 

Bloomberg also reported that Xbox plans to significantly reduce spending on marketing and other parts of the business.

The news comes as a blow to Xbox fans, as Sharma had previously won praise after Microsoft cut the price of its Game Pass service - a monthly subscription that gives players access to a library of Xbox games - from $29.99 to $24.99.

Her strategy also ended day-one releases for future Call of Duty titles on the service.

In a post on X that drew widespread support, Sharma defended the Game Pass price cut, writing: 'Game Pass Ultimate has become too expensive for too many players... We'll keep learning and evolving Game Pass to better match what matters to players.'

Microsoft did not immediately respond to the Daily Mail's request for comment.