Microsoft Corp (NASDAQ:MSFT) is considering options for its Xbox gaming unit, including a potential spinoff or restructuring as a wholly owned subsidiary, according to a report citing people with direct knowledge of the discussions.

Key Highlights

  • Microsoft is reportedly weighing a spinoff or subsidiary restructuring for its Xbox gaming unit.
  • A joint venture with other partners is also among the options under consideration.
  • Xbox gaming head Asha Sharma plans to increase spending on franchises including Halo, Fallout, and The Elder Scrolls.
  • Xbox is separately reported to be planning major layoffs and budget cuts next month.

Microsoft Corp (NASDAQ:MSFT) is considering a range of strategic options for its Xbox gaming division, including a potential spinoff or restructuring of the unit as a wholly owned subsidiary, according to a report citing three people with direct knowledge of the discussions.

The report said the Windows maker is also weighing the possibility of forming a joint venture with other partners as part of a broader overhaul that could make the gaming business easier to sell in the future. While no restructuring is described as imminent, all options reportedly remain on the table.

Xbox has faced challenges in recent years, with Microsoft's strategic bet on subscriptions and cloud gaming failing to fully offset declining console hardware sales and a limited pipeline of major new title releases.

Microsoft already operates other large businesses, including professional network LinkedIn and software development platform GitHub, as wholly owned subsidiaries, a structure that could serve as a template for how Xbox might be organized going forward.

Asha Sharma, who took over as head of the gaming unit in February, reportedly plans to increase spending to accelerate development of new titles from some of Xbox's most successful franchises, including Halo, Fallout, and The Elder Scrolls. According to the report, Microsoft chief executive Satya Nadella and finance chief Amy Hood have approved Sharma's plan to boost spending on top-tier game development for the fiscal year beginning in July, though the final budget has not yet been confirmed and could still change.

Microsoft did not immediately respond to a request for comment on the report.

The development follows an earlier report this week indicating that Xbox is planning significant layoffs next month, along with substantial cuts to marketing and other budgets, marking what would be the first major restructuring under Sharma's leadership.

For Microsoft investors, the discussions around Xbox's structure come at a time when the company continues to balance investment in gaming against broader priorities across cloud computing and artificial intelligence, areas that have increasingly dominated Microsoft's growth narrative in recent quarters.