The news: Microsoft is planning a major round of layoffs next week in its Xbox division as part of broader corporate restructuring, per Bloomberg. This marks Microsoft’s fourth major job cut in 18 months and follows mounting pressure to raise margins after buying Activision Blizzard for $69 billion. 

Layoffs are expected to affect teams across Xbox, including gaming hardware, software, and services. Broader job reductions across Microsoft, particularly in sales, are also expected.

The long game: After Microsoft’s monumental Activision Blizzard buy, the company became the biggest video game publisher, but wrangling its massive stockpile of game franchises and studios has been difficult, resulting in layoffs and realignment.

• With Xbox console sales fizzling, Microsoft is looking at partnerships with Asus for handheld gaming and now with Meta for immersive VR headsets. 
• It’s also making its game libraries available to competing platforms and on Android and iOS smartphones. 

Microsoft could be moving away from proprietary hardware and leaning toward licensing and partnerships, offloading its gaming devices business to partners and OEMs in the same way it sells software and solutions.

Consoles are far from dead: Xbox consoles remain central to Game Pass subscriptions, and high-end gamers continue to prefer dedicated systems for performance and exclusives. 

Microsoft’s ecosystem play may widen its audience but risks diluting brand loyalty and undermining its flagship console identity just as Nintendo’s console cachet is soaring. 

Our take: As hardware sales slump and consolidation pains mount, the company is pivoting toward platform-agnostic gaming, licensing, and immersive partnerships. 

For advertisers and marketers, this signals that the future of Xbox isn’t hardware but an ecosystem. Aligning campaigns with emerging touchpoints like cloud gaming, mobile access, and VR could help brands stay in front of where players are headed.