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In a new interview, Microsoft has pushed back firmly against recent reports that it imposed a strict 30% profit margin target on its Xbox division, calling the figure "incorrect." The clarification comes as the gaming giant navigates a challenging period marked by significant layoffs, project cancellations, and slumping console sales.
The controversy stems from an October Bloomberg report which stated that Microsoft Chief Financial Officer Amy Hood had set a 30% profit goal as part of internal "accountability margins," with Xbox specifically highlighted as under pressure to meet this benchmark. The figure raised eyebrows across the gaming industry, where profit margins typically range between 17% and 22%, according to analysts. For context, earlier documentation showed Xbox’s own margin was around 12% in 2022.
Microsoft Sets the Record Straight
Microsoft addressed the rumors head-on in a recent CNBC interview, where a company spokesperson stated, “While the company does set ambitious goals, the reported 30% profit margin target was incorrect.” The company emphasized that it aims high but did not provide an alternative specific figure for its Xbox gaming division’s profit goals.
This denial is set against a backdrop of intense cost-cutting within Microsoft's gaming arm. Over the past year, more than 9,000 employees have been affected by layoffs across multiple rounds. The financial pressure has also led to the cancellation of several high-profile, big-budget projects, including The Initiative’s Perfect Dark reboot, Rare’s long-in-development Everwild, and ZeniMax Online’s sci-fi MMO, Project Blackbird.
A Tough Console Market and Strategic Pivot
The financial and strategic challenges for Xbox are multi-faceted. Hardware sales have faced particularly steep headwinds; November saw a dramatic 70% year-over-year drop in console sales, placing Xbox far behind rivals Sony’s PlayStation 5 and the Nintendo Switch 2 in the current market.
Further signaling budgetary constraints, Xbox confirmed last week it would not launch an "Xbox Wrapped" year-in-review feature for 2024, with reports suggesting funds are being reallocated toward a major 25th-anniversary celebration planned for 2026.
Despite these setbacks, Microsoft’s strategy for Xbox appears to be pivoting away from a pure console-war focus. The company is doubling down on its broader gaming ecosystem, investing heavily in cloud gaming, the Xbox Game Pass subscription service, and a push toward cross-platform availability. This shift involves forgoing traditional exclusivity to bring Xbox games and services to PC, handheld devices like the ASUS ROG Ally, mobile, and even other platforms.
The Road Ahead
As reported by CNBC in their analysis of the console landscape, the industry is evolving rapidly, and Microsoft's moves reflect a bet on a future where access outweighs hardware ownership. While the immediate picture shows a division under significant pressure, the long-term game plan is one of expansion beyond the console box.
It remains unclear if Bloomberg will issue a correction or update its original report regarding the 30% margin claim. For now, Microsoft’s direct denial seeks to quell one rumor, even as the larger narrative around Xbox’s transformation and current struggles continues to develop.
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