Xbox CEO Asha Sharma has acknowledged that Microsoft's ambitious Game Pass strategy has not achieved the growth the company had anticipated. Reports suggest the subscription service is significantly underperforming against internal projections, with current subscriber numbers falling far short of previous targets. While Microsoft had aimed for approximately 77 million subscribers this year, the service currently has around 30 million. Further compounding the issue, an internal slide revealed during the 2023 FTC v. Microsoft trial indicated a goal of 100 million subscribers by 2030, a milestone that now appears increasingly unlikely.
These admissions come as Microsoft undergoes a substantial restructuring within its Xbox division, which includes significant layoffs. This week, the company announced that 3,200 staff members across Xbox are set to lose their jobs this fiscal year. As part of these cuts, four studios acquired to bolster Game Pass content under the Phil Spencer era have been divested, with another studio reportedly in negotiations for sale or closure.
In an internal email to staff, Sharma stated that the company's gaming strategy is "not healthy," citing lower profit margins compared to industry peers and a challenging market entry with a smaller install base and higher cost structure. The core business has reportedly weakened as efforts to grow through Game Pass, multi-platform releases, and an expanded content portfolio did not yield the expected rapid growth.
Microsoft's investment in Game Pass, including the substantial $69 billion acquisition of Activision Blizzard, was largely intended to drive subscriber numbers, particularly by launching major titles like Call of Duty on day one. However, these efforts have not translated into the desired subscriber growth, with console numbers reportedly plateauing. A previous price increase in October of last year, which raised Game Pass prices by 50%, was noted by current Xbox chief strategy officer Matthew Ball to have caused the service to "shed millions of subscribers over the span of a few months."
While precise subscriber figures for early 2026 remain unconfirmed, it is known that Game Pass had at least 34 million members as of February 2024. The service's revenue reportedly neared $5 billion for the first time in July 2025.
Following her appointment, Sharma has implemented changes, including a reduction in Game Pass pricing and the removal of Call of Duty from day-one releases on the service. Sharma recently indicated to Bloomberg that Game Pass has begun to recover after an eight-month decline, returning to growth and improved retention. The company is also reportedly focusing on re-establishing a closer connection with its player base.
The future of Game Pass content is now uncertain, with studios like Double Fine, Compulsion Games, Ninja Theory, and Undead Labs no longer under Microsoft's ownership and not obligated to launch their games on the subscription service. This raises questions about whether future titles such as State of Decay 3 or Senua's Saga: Hellblade II will be day-one releases on Game Pass. The effectiveness of launching major franchises day one on Game Pass remains a point of discussion, with speculation that Microsoft might reconsider this approach, potentially aligning more closely with models like Sony's PlayStation Plus, which does not typically feature first-party games on launch day.