Report: Microsoft Has Not Ruled Out Spinning Xbox Into Its Own Company

Microsoft has not ruled out turning Xbox into a separate company, according to a report from The Information that was shared by Windows Central. The report cites three people familiar with internal discussions, who say the firm has weighed reorganizing Xbox into a wholly-owned subsidiary, forming a joint venture with outside partners, or spinning the brand out entirely. Xbox has run as a division inside Microsoft since the first console launched 25 years ago, so any of these would break that arrangement.

A wholly-owned subsidiary would make Xbox a distinct company while leaving Microsoft in full control, the structure the company already uses for LinkedIn and GitHub. A joint venture would bring other firms in to help run and fund the business. A full spin-out would push Xbox outside Microsoft's direct jurisdiction. None of it is scheduled. The sources say Microsoft has no imminent restructuring plans and that the options stay on the table only if a change would make Xbox a more successful business. Satya Nadella and CFO Amy Hood would not oppose a reorganization on those terms.

The financial backdrop explains why the question is being asked. Xbox has gone through repeated performance declines, hardware revenue has fallen across recent quarters, and Sharma has said publicly that the brand is not in a healthy spot. Eurogamer reported that Xbox is cutting budgets and preparing to lay off a significant number of staff as part of Sharma's business reset, with the first cuts expected in July once the fiscal year closes. Bloomberg sources add that marketing budgets face major reductions in the same window.

I read the restructuring talk as a symptom of that margin problem rather than a fix for it, since moving boxes on an org chart does not ship a game or sell a console.

The report also points at the product side, where the plan is more concrete. Xbox is said to be moving faster on new games from franchises it already owns, with Halo, Fallout, and The Elder Scrolls named directly. Fallout and The Elder Scrolls are described as particular areas of focus for Sharma. Both came to Microsoft through its $7.5 billion purchase of ZeniMax Media in 2020, the deal that brought Bethesda inside the company. The drought since then is measurable. There has been no new Fallout game since Fallout 76 in 2018, and The Elder Scrolls 6, announced that same year, remains in development.

I think that franchise news lands harder with players than the corporate question, because two of Microsoft's largest series have gone most of a decade without a mainline entry.

Halo is the nearest test of the new pace. Halo: Campaign Evolved, a remake of 2001's Halo: Combat Evolved, rebuilt in Unreal Engine 5, releases July 28 on Xbox, PC, and PlayStation 5. The PS5 version is a first for the series and the first new Halo release since Halo Infinite in 2021. From July, Sharma is set to execute a plan to spend more on top-tier games in the coming fiscal year. Nadella and Hood approved the plan, though the budget has not been locked in and could still change.

This sits inside a run of moves that started when Sharma replaced Phil Spencer in February 2026. Her stated goal is to make Xbox "where the world plays," and her reset has reached pricing, branding, hardware, and exclusivity. On April 21, Microsoft cut Game Pass prices. Ultimate dropped from $29.99 to $22.99 a month, and PC Game Pass fell from $16.49 to $13.99. The cut came with a policy change: new Call of Duty titles no longer arrive in Game Pass on launch day, and subscribers wait a year. Sharma called the price drop the first step under an affordability mandate, then described a second step about what the subscription should offer eight years after launch. The Verge later reported a leaked "Starter Edition" tier bundled with Discord's Nitro service.

That second step also reaches overseas. A separate Windows Central report described a China-focused Game Pass tier project Saluki, with codename references verified inside recent Xbox Insider builds. Reporter Jez Corden said Saluki covers several tiers and reward structures shaped around China's regulatory rules and local play habits rather than a single subscription level. A second codename, Positron, points to a possible disc-to-digital program tied to the next console, Project Helix.

Exclusivity is the question a restructuring would not settle. Microsoft spent $68.7 billion on Activision Blizzard King in 2023 and $7.5 billion on ZeniMax Media in 2020, then put once-exclusive titles on rival hardware, most recently Starfield on PS5. The open letter Sharma and content boss Matt Booty published on April 23 said Xbox would reevaluate its approach to exclusivity, windowing, and AI. In her April 24 interview with Stephen Totilo, published in the Game File newsletter, Sharma declined to commit to a return to Xbox exclusive games or to a timeline.

"We'll take a data-driven approach and a strategic-driven approach, and then we'll look at our principles and we'll make some calls."

— Asha Sharma

There are signs of where the line might fall. Eurogamer reported that Gears of War: E-Day will stay a console exclusive to help win back Xbox's core audience. The same April letter restored the division's name from Microsoft Gaming to Xbox, the label it carried for 25 years, and cast the brand as a challenger, language Microsoft had not used in gaming since the Xbox 360 era.

Sharma has set daily active players, not console unit sales, as the number she wants to grow, and said she wants the Xbox division overall to return to growth in the coming year. The restructuring report names no buyers, no partners, and no date. It describes a set of options Nadella and Hood are willing to consider if the math improves, alongside a spending plan that has been approved but not finalized and a layoff round confirmed so far only by its timing. The June 7 Xbox Games Showcase and the July fiscal reset are the points where those threads either tighten or come apart.