Microsoft CEO Satya Nadella Says Xbox's 'Streamlining' Is 'Great to See' Days After Layoffs and Restructuring

Microsoft CEO Satya Nadella has commented on Xbox's restructuring efforts that have led to layoffs, project cancellations, and studio reorganisation. The executive has said that the “streamlining” of Xbox under new boss Asha Sharma is “great to see”.

Nadella appeared on the Sources podcast with Alex Heath over the weekend and talked about Microsoft's bet on AI, Copilot, AI safety, among other things. He also briefly touched upon the state of Xbox. Microsoft's gaming division is in the process of resetting its business, which began in July when the company announced its plan to lay off 3,200 employees by the end of fiscal year 2027.

As part of the ongoing restructuring, Xbox laid off 268 employees last week and announced it was reorganising many of its game studios and handing over the Halo franchise to Call of Duty maker Activision.

Xbox's Streamlining 'Great to See'

Speaking on the podcast, Nadella expressed optimism about Xbox's catalogue of IPs and praised the division's streamlining efforts under Sharma.

“I feel fantastic about the IP we have right now. If I look at the studios, the IP portfolio we have, and our ability to then take that and produce great games going forward, I feel fantastic,” Nadella said.

“There's some amount of streamlining the team is doing, and Asha is doing, which is great to see,” he added.

The Microsoft boss did not comment on layoffs and studio divestitures specifically.

“We have to invent the right sustainable business model that allows us to deliver gaming to more and more people. That has always been the goal, which is we want to be a great publisher and a great platform provider for games across both PCs and Xboxes.

“So that is sort of our goal, and I think Asha and the team have said that Xbox is going to get back to growth this next fiscal year, and that's the plan they're executing on, and in that process, do a bang-up job of producing some great games,” he said.

Nadella's comments echoed his remarks made during Microsoft's fourth-quarter earnings call for the fiscal year 2026 in July, where he said he expected Xbox to return to growth by the end of fiscal year 2027.

“When it comes to Xbox, we are making the necessary decisions required across our content portfolio, platform, and operations to reset the business for long-term growth,” the Microsoft chief said at the time.

The latest round of Xbox cuts impacted Halo Studios and several other first-party developers. Obsidian is now set to operate under Bethesda, while Playground Games and Turn 10 Studios have been merged. Activision is expanding its remit to include Rare and World's Edge and will make the next Halo game.