Microsoft Explored Spinning Out Xbox to Sell the Brand

Microsoft internally explored spinning out Xbox as a standalone subsidiary and making the gaming brand easier to sell, according to a report from The Information citing three people familiar with the discussions.

Options reportedly included finding an outside business partner or restructuring Xbox similarly to how LinkedIn operates within the larger Microsoft corporation, though no formal buyers or partners were identified.

The June report preceded the July 6, 2026 announcement of Xbox layoffs and followed a candid letter from new Xbox CEO Asha Sharma acknowledging that the brand cannot continue on its current path.

At the time, Microsoft had not confirmed the plans and The Information said changes were not expected immediately, but the disclosures signal deep uncertainty about Xbox's future within the company.

The restructuring reached payroll before any sale of Xbox itself. On July 6, 2026, Asha Sharma announced 1,600 immediate job cuts and approximately 3,200 reductions across fiscal 2027, according to Insider Gaming. Compulsion Games and Double Fine were set to return to management, while Ninja Theory and Undead Labs had terms for new ownership. That changes the studio portfolio without confirming the earlier speculation about spinning out the whole division. Workers bear the first cost of a strategy whose returns will take longer to judge. Watch the next financial results for whether the smaller operation improves margins.