Microsoft CEO Satya Nadella has backed the ongoing restructuring at Xbox, describing the “streamlining” being carried out under Xbox CEO Asha Sharma as “great to see,” even as the gaming division continues to reduce its workforce and reorganise studios.
Nadella made the comments during a recent episode of the Sources podcast with Alex Heath, where he discussed Microsoft's gaming business, its portfolio of studios and intellectual property, and the company's plans for Xbox and PC gaming.
Nadella Expresses Confidence in Xbox
Nadella said he feels “fantastic” about the intellectual property and studios currently within Microsoft's gaming portfolio.
He also connected the restructuring to Xbox's broader objective of creating a sustainable business model capable of reaching more players across both PC and Xbox platforms.
The comments come as Xbox continues a significant organisational reset under Sharma.
More Xbox Job Cuts
Xbox recently announced another round of workforce reductions affecting 268 employees, following earlier cuts this year.
Microsoft had previously announced plans to reduce approximately 3,200 gaming jobs during fiscal 2027, with the restructuring affecting teams and studios across the Xbox organisation.
The changes have also involved studio reorganisations and changes to how major franchises are managed.
Studios and Franchises Being Reorganised
As part of the restructuring, Microsoft has been consolidating parts of its gaming organisation.
Reports indicate that Obsidian has been placed under Bethesda, while development of the Halo franchise has been moved toward Activision. Other studios have also faced ownership or organisational changes.
Microsoft's gaming organisation expanded considerably following major acquisitions, including the purchase of Activision Blizzard for about $69 billion and ZeniMax Media.
The current restructuring is intended to simplify the organisation and focus resources around major franchises and business opportunities.
Xbox Targets Growth
Nadella said the company's goal is to build a sustainable model that allows Microsoft to deliver games to more people.
He also referred to Xbox's expectation of returning to growth in the next fiscal year, with the gaming division continuing to develop games for both PC and Xbox.
Xbox Chief Creator Officer Matt Booty has also indicated that the organisation is roughly three-quarters of the way through the previously announced restructuring, suggesting that additional changes may still occur.
AI Remains a Broader Microsoft Priority
Nadella's comments about Xbox come as Microsoft continues to make significant investments in artificial intelligence across its wider business.
The company is increasingly positioning AI, cloud computing and Copilot as core components of its technology strategy, while individual business units are also being reorganised around changing priorities.
For Xbox, however, the current restructuring has primarily been described in terms of simplifying the organisation, improving efficiency and building a sustainable gaming business rather than being directly attributed to AI.
What Comes Next for Xbox?
The restructuring represents a significant change for Microsoft's gaming business as it attempts to balance a large portfolio of franchises and studios with the need for sustainable growth.
Nadella's comments indicate continued confidence in Xbox's intellectual property and its ability to develop games for a wider audience.
For employees and the gaming industry, the focus now will be on how the reorganised Xbox teams operate, which franchises receive investment and whether Microsoft's planned changes translate into the growth the company expects in the next fiscal year.