Microsoft Reportedly Sets Outrageous 30% Profit Target for Xbox Studios, Sparking Cuts and Price Hikes

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Microsoft is allegedly demanding very ambitious profit targets from its Xbox team, exceeding typical expectations for the gaming industry.

According to sources at Bloomberg, Microsoft is aiming for Xbox to achieve a 30% “accountability margin” – Microsoft’s internal way of measuring profitability.

Most video game companies typically earn a profit of 17% to 22%. Xbox, however, has generally made between 10% and 20% profit over the last six years.

Records filed in court revealed that the division earned a 12% profit in the first nine months of Microsoft’s 2022 fiscal year. According to S&P Global analyst Neil Barbour, a profit margin of 30% or higher is typically achieved by exceptionally successful publishers.

According to Bloomberg, Xbox has already undergone significant changes to meet its ambitious goals. This includes multiple rounds of layoffs affecting thousands of employees, and the cancellation of several games that had been in development for years.

This affected several projects, including Rare’s Everwild, the planned reboot of Perfect Dark by The Initiative, and ZeniMax Online Studios’ Project Blackbird. Microsoft also closed down The Initiative, along with Arkane Austin (the studio behind Redfall) and Tango Gameworks, known for Hi-Fi Rush.

So, things are getting a little pricey over at Xbox. Not only have there been layoffs and some games cancelled, but they’ve also upped the price of consoles and Xbox Game Pass Ultimate – it’s now $29.99 a month. They actually tried to make new games cost $80, which a lot of us gamers weren’t happy about, especially after the reaction to The Outer Worlds 2. They quickly dropped that back down to $70, but experts think we might see that $80 price tag again next year. Hopefully not, though!

According to Bloomberg, Microsoft’s CFO, Amy Hood, set a 30% profit margin target in the fall of 2023, soon after the company finished acquiring Activision Blizzard for $69 billion. To put that in perspective, Sony’s PlayStation business had a profit margin of 16% in the first quarter of its 2025 fiscal year.

Microsoft might shift its strategy for Xbox games to focus more on profits, according to a new report. This could mean prioritizing games that are cheaper to make or more likely to be popular, potentially at the expense of more innovative, but riskier, projects. Microsoft is also reviewing the performance of its Xbox hardware division and could make significant changes.

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2025-10-23 22:46