Microsoft spent $68.7 billion on Activision Blizzard to demonstrate its full commitment to gaming. Less than three years after that deal closed, the company has been weighing corporate restructuring that would make XBOX easier to sell.
According to The Information, which cites three people with direct knowledge of the discussions, Microsoft has not ruled out spinning out its gaming unit, restructuring it as a wholly owned subsidiary, or forming a joint venture with outside partners as it prepares an overhaul of the division. The report says a restructuring is not imminent and that the same planning includes new Halo and Fallout games.
The hedges in that sentence are doing honest work, and they should stay. The timing is harder to wave off: the report landed within days of XBOX’s own chief executive telling employees that the business cannot continue the way it has been running.
A Reset Memo First, a Spinout Study Second
On June 10, XBOX CEO Asha Sharma and content chief Matt Booty told staff in a memo, later posted publicly, that the division needs a reset. Sharma’s own numbers were blunt: annual gaming revenue has fallen nearly $500 million over five years, a stretch in which Microsoft put roughly $20 billion into the business, and the memo described the unit as overextended after the ZeniMax and Activision Blizzard acquisitions. Console storage components, she wrote, cost twice what they did last fall because AI demand is consuming the chip supply.
Bloomberg’s Jason Schreier reported that layoffs are expected shortly after the fiscal year closes June 30, along with cuts to marketing and other budgets; sources speaking to The Verge added that a studio closure is possible. The reset memo arrived roughly 48 hours before the spinout report.
What the Receipts Say
The Information’s report does not arrive in a vacuum. The last five years of XBOX, in order:
- March 2021: Microsoft closes its $7.5 billion purchase of ZeniMax, the parent of Bethesda and the Fallout franchise.
- October 2023: the $68.7 billion Activision Blizzard deal closes, the biggest acquisition in gaming history.
- July 2025: a company-wide layoff round hits gaming, canceling Perfect Dark and Everwild and closing The Initiative, while first-party releases continue to move to PlayStation.
- October 2025: Game Pass Ultimate jumps 50% to $29.99 a month. An XBOX executive later acknowledges the service lost millions of subscribers in the months that followed, and the price retreats to $22.99.
- February 2026: Phil Spencer retires after 38 years, XBOX president Sarah Bond exits, and Microsoft hands gaming to Asha Sharma, previously the head of its CoreAI group.
- June 10, 2026: the reset memo. This week: the spinout report.
Adding the two purchases, Microsoft spent $76.2 billion buying the two largest publishing groups in the industry. Over roughly the same five years, Microsoft’s CEO reported that annual gaming revenue decreased by half a billion dollars. That is the arithmetic a prospective buyer would read first, and it is the arithmetic longtime XBOX owners have pointed to since the multiplatform pivot began.
A Subsidiary Is the Structure a Seller Builds
A wholly owned subsidiary changes nothing for players on day one; XBOX would still belong to Microsoft. What it changes is the paperwork: separate books and a legal perimeter around what is inside. The Information’s sourcing states the implication plainly, describing a structure that could make the business easier to sell. A joint venture is the same logic with a partner already holding a piece.
The AI buildout driving Microsoft’s data center spending is the same demand that, per Sharma’s memo, made console storage parts twice as expensive in under a year. Microsoft’s other priorities are raising the price of keeping XBOX , and the executive now running gaming came from the AI side of the house.
To Be Fair, Studying a Spinout Is Not Selling
Companies of Microsoft’s size model structural options constantly, and three sources describing discussions is not a board resolution. The report itself says no restructuring is imminent. The same story carries genuine investment signals: new Halo and Fallout games in planning, on top of a 2026 slate that already includes Halo: Campaign Evolved this summer and Gears of War: E-Day and Fable in the fall. A company writing off gaming does not usually remake its crown jewels.
But the reassurance and the warning are the same fact viewed from different angles. Franchises that ship everywhere, PlayStation included, are precisely what makes the unit attractive on its own, and Halo and Fallout hold their value with or without a Microsoft logo above them. Nothing Microsoft says it is building requires XBOX to stay inside Microsoft, and the structures it has been studying are the ones a company chooses when it wants to keep its options open.
Microsoft has not decided to sell XBOX . On the evidence of its memo and this report, it has been arranging the furniture so that it could. The date to watch is June 30: when the fiscal year closes and the reported cuts arrive, the shape of the reorganization that follows will show whether gaming is being repaired as a division or packaged as an asset.
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