Microsoft is evaluating a major restructuring of its Xbox division. Potential options include spinning the unit into a wholly owned subsidiary, forming a joint venture, or an outright sale. CEO Satya Nadella and Xbox CEO Asha Sharma are leading the strategic review.
The gaming division’s profit margins collapsed to 3% this fiscal year. This performance trails the high margins generated by Microsoft’s cloud and AI businesses. The review follows the recent $69 billion acquisition of Activision Blizzard.
Microsoft plans a new round of major layoffs for the division in July. The company is re-evaluating the unit's strategic position as it intensifies its focus on artificial intelligence. These developments have created a headwind for the stock amid investor concerns over massive AI-related capital expenditures.