Is Xbox Dying in 2026, or Just Being Told to Pay Its Own Way?

On November 15, 2026, the original Xbox turns 25. Amid arguments over whether Xbox is dying, Microsoft marks it with a translucent green $899.99 Series X25. That's three times what the first console cost (not adjusted for inflation), and the box includes Halo: Campaign Evolved, a new version of the very game Xbox launched with in 2001. The next Halo, meanwhile, won't come from Halo Studios. Instead, it has been handed to a new team at Microsoft-owned Activision.

There isn't much to celebrate at Xbox, though. In 2026, Microsoft replaced the head of Xbox, announced what it called the biggest restructuring in Xbox history and parted ways with three studios. Xbox console unit sales in the US fell by a third year over year from January through August, according to market research firm Circana. And in July, new Xbox CEO Asha Sharma put it bluntly in a memo to staff: "Our business today is not healthy."

That question has divided players, YouTubers and former industry executives all year. One camp, which includes one of the original Xbox's creators, believes Microsoft is quietly winding the business down. If they're right, Xbox could end up like Sega, which stopped making consoles in 2001. The other camp points out that many of Microsoft's games now sell well on PlayStation too, and that Forza Horizon 6 became one of the biggest hits of the year.

But both camps are missing the real question, and it's the one I'll try to answer: is Microsoft burying Xbox, or simply insisting that the business pay its own way?

Phil Spencer had run Xbox for 12 years when, on February 20, Microsoft announced that he was retiring and leaving the company. Spencer said he had told Microsoft CEO Satya Nadella in the fall of 2025 that he was thinking about stepping back. He agreed to stay on as an adviser through the summer to ensure a smooth transition. Xbox president Sarah Bond also left Microsoft, a decision she said was her own. Some insiders claimed Spencer had been forced out after a weak year, but officially it was a planned retirement, and no evidence has surfaced to support that claim.

The new head of Xbox, Asha Sharma, did not come from the games industry. She had led product teams for Microsoft's AI tools and developer platforms. Before joining the company, she was chief operating officer at the delivery service Instacart and a vice president of product at Meta. In her first note to the team, she committed to great games, the future of play and "the return of Xbox" to its core fans. She also promised not to "chase short-term efficiency or flood our ecosystem with soulless AI slop."

When Xbox shared details about its next console in March, Sharma wrote that Project Helix "will lead in performance and play your Xbox and PC games." At the Game Developers Conference, Xbox vice president Jason Ronald said the console will use a custom AMD chip. He added that Microsoft plans to start shipping early hardware to developers in 2027. Microsoft has not announced a release date or a price, but in April it did officially rename its gaming division XBOX, in all capital letters.

But a new name doesn't cost players anything. The Game Pass changes hit subscribers right in the wallet.

The subscription saga began before Sharma arrived. On October 1, 2025, Microsoft raised the US price of Game Pass Ultimate from $19.99 to $29.99 a month, a 50% jump overnight. In return, subscribers got more games and extras such as Fortnite Crew and Ubisoft+ Classics, but a year of Ultimate cost $120 more. Microsoft hasn't said exactly how many subscribers it lost.

On April 21, 2026, Sharma wrote on X that "Game Pass Ultimate has become too expensive for too many players." The same day, Ultimate dropped to $22.99 and PC Game Pass fell from $16.49 to $13.99. But the cut came with a catch: future Call of Duty games will no longer join Ultimate and PC Game Pass at launch and will instead arrive "during the following holiday season (about a year later)." Call of Duty: Modern Warfare 4 is the first game under the new rule. It launches on October 23, and Xbox has told subscribers that "Game Pass availability starts Holiday 2027." So if you signed up for Ultimate to play the new Call of Duty on day one, you'll now have to either buy it or wait about a year.

In June, Xbox chief strategy officer Matthew Ball admitted on stage that the hike had been costly. "We shed millions of subscribers over the span of a few months," he said.

Even after the cut, Ultimate costs $22.99, more than the old $19.99. And starting in November, cloud gaming in Game Pass gets monthly caps of 15 hours on Ultimate, 10 on the cheaper Premium tier and 5 on the cheapest, Essential. Microsoft expects the change to affect 4% of subscribers, and players who hit the cap will have to pay for more hours.

Whether the price cut brought subscribers back is hard to verify. In June, Sharma and Xbox content chief Matt Booty told staff that "after 8+ months of decline, our service has started to grow again," but gave no figures. The most recent official subscriber count, 34 million, dates back to February 2024. This summer, The Wall Street Journal and Bloomberg, citing anonymous sources, put the number at around 30 million. In July, Circana analyst Mat Piscatella summed it up this way: "Game Pass wasn't the bad idea. The bad idea was trying to shift Xbox into a subscription-based service group with a massive sub count to align with things like Office 365 in the first place."

The subscription did at least come down in price, but consoles only kept climbing.

The Xbox Series X has gone up in price three times in 15 months. In May 2025, it went from $499.99 to $599.99. In October 2025, it rose to $649.99, and on June 25, 2026, Microsoft announced a third increase. As of August 1, the Series X with a disc drive costs $799.99, $300 more than at its 2020 launch. The cheapest Series S now costs $499.99, exactly what the Series X cost at launch. The 2 TB Series X has been discontinued.

Microsoft blamed component costs, saying prices for the memory and storage used in consoles "have increased by more than 2.5x" and could double again by fall 2027. Consoles, the company added, "are typically not sold at a profit, but instead for less than they cost to make." Earlier that month, Sharma and Booty had told staff that "we are currently unable to make as many consoles as players want to buy."

Sales keep falling: according to Circana, Xbox console unit sales in the US fell 33% from January through August 2026 compared with the same period a year earlier. That's an all-time low for those eight months. Meanwhile, the average price paid for a new Xbox console rose 26% to $529. "Price sensitivity is becoming a real problem," Piscatella noted.

PlayStation unit sales in the US were down 25% too, so this isn't just a Microsoft problem. In Piscatella's words, the US console market "has not been in a more precarious position since the early 80s," when the infamous video game crash of 1983 hit. Microsoft's own reports show the same trend, with Xbox hardware revenue down 29% in fiscal 2026, which ran from July 2025 to June 2026.

Still, subscriptions and console prices are just the part players see. For Xbox's leaders, 2026 came down to money, and they talked about it with unusual candor.

On June 10, Sharma and Booty wrote to staff that, excluding Activision Blizzard King, Xbox had spent "over $20 billion" in the past five years on games, on the platform and on selling consoles for less than they cost to make (console subsidies). Annual revenue for Xbox outside Activision Blizzard King, they added, "declined nearly half a billion during that time." They expected Xbox to finish the fiscal year with about $3 left over from every $100 of revenue after the division's costs, less than a year earlier ("about a 3% accountability margin, down year-over-year"). That figure comes from an internal Microsoft measure the company doesn't explain in detail. "Going forward, this cannot continue," they concluded.

That evening, Nadella made the same point while recording an episode of the Hard Fork podcast that came out on June 12. "No one can accuse Microsoft of not having invested for the last 25 years," he said. "Now we have to turn this into a sustainable business." He added with a chuckle that "there's more monetization of Xbox games happening on YouTube than at Microsoft," though he gave no figures.

The money really is shrinking: in fiscal 2026, Xbox revenue came to $21.8 billion, down 7% from fiscal 2025, and it was lower than a year earlier in every quarter. Sharma summed up the core problem in a July 29 post on X. "In FY26, over 200 million new players came to XBOX and our games, but our business did not grow with our audience," she wrote.

Sharma had laid out Xbox's answer a few weeks earlier, and it started with layoffs.

In a July 6 memo titled "Resetting XBOX," Sharma wrote: "Our business today is not healthy. We are operating at margins that are 3-10x lower than comparable platform and publishing businesses." In other words, Xbox keeps far less of each dollar than comparable companies. The plan is to shrink the Xbox team by about 3,200 people by the end of June 2027, including staff at the studios leaving Xbox; about 1,600 roles were eliminated right away. CNBC, citing an anonymous source, reported that the planned reduction of 3,200 amounted to around 20% of Xbox staff. Companywide, Microsoft cut about 4,800 roles that day, and Microsoft's chief people officer, Amy Coleman, wrote separately that "the roles eliminated today are not being replaced by AI."

This was not the first wave: in January 2024, after the Activision Blizzard deal, Microsoft's gaming division cut about 1,900 roles. In May it closed Arkane Austin and Tango Gameworks, and in September it cut another 650. In July 2025, Microsoft closed The Initiative and stopped work on Perfect Dark and Everwild. "Our platform, hardware, and game roadmap have never looked stronger," Spencer told staff at the time. A year later, his successor wrote that the business was not healthy.

Xbox decided to part ways with four studios, but on July 6 the plan was to let them go to new owners, not to shut them down. Double Fine and Compulsion Games became independent and took the rights to their games with them, including Psychonauts 2 and South of Midnight, in deals finalized in August. Sharma wrote that Ninja Theory, the Hellblade developer, and Undead Labs had "entered terms to join new ownership with funding to complete and grow Senua and State of Decay 3." At Arkane's studio in France, the team behind Dishonored, management began legally required consultations with employee representatives to review "potential strategic options." Microsoft expects the process to run through the end of the year. Sharma explained why Xbox was parting with these studios: "We have also learned that we are not the best home for every type of studio; in a typical year, we lost 64 cents for every dollar we invested." That figure refers to investment in studios, not to Xbox as a whole. In the same memo, she put it even more directly: "It is neither possible nor desirable to own every great independent studio."

The memo also promised to restructure Xbox internally. According to Sharma, work in some parts of Xbox passed through as many as 14 layers of management. Platform teams had grown 40% since the start of the current console generation, "even as our player base and playtime have declined." The goal is to cut that to five layers at most.

Sharma said no publicly announced games were being canceled. But the cuts reached Activision, Bethesda, Blizzard, King and Mojang. A state filing shows that in Texas alone, Bethesda parent company ZeniMax laid off 158 people, including 136 at id Software, the studio behind Doom. John Carmack, who co-founded id Software and left the studio years ago, wrote on X: "My 'Microsoft will probably be a good steward of the brand' statement isn't aging well."

Three weeks after its departure from Xbox was announced, Double Fine laid off 23 of its own employees. In a September interview with Bloomberg, Double Fine head Tim Schafer said he couldn't imagine any amount of profit keeping the studio at Xbox, short of a Minecraft-sized hit. "We had a mutually beneficial mission, which is just to put great games on Game Pass, and then their mission changed," he said.

In September, Xbox's new mission caught up with Halo itself.

Halo launched alongside the original Xbox in 2001 and became the console's defining game. In 2026, the series broke with tradition twice.

First, Halo came to PlayStation. Halo: Campaign Evolved, a new version of the 2001 original, launched on PS5 on July 28, the same day as on Xbox (read our Halo: Campaign Evolved review). Analytics firm Alinea Analytics estimated that by August 11, two weeks after launch, the game had sold about 544,000 copies on PS5, slightly fewer than on Xbox consoles and the Xbox app on PC (not counting Steam). Alinea called that a quiet debut for the first Halo on PlayStation, given the PS5's larger install base. Then, on September 22, Microsoft announced that Activision, which it bought in 2023 for nearly $69 billion, would make the next game in the series.

In a memo, Matt Booty said the next Halo would be "led by a new, purpose-built team that is separate from ongoing development and plans for Call of Duty." A small team at Halo Studios, formerly 343 Industries, stays on to support the games already out. To see how unusual this is, imagine Sony handing the next God of War not to Santa Monica Studio but to Bungie, which Sony also owns. Activision president Rob Kostich said the goal is to "make the greatest Halo game ever." Rumors of a full reboot come only from insiders, and Microsoft has not confirmed them. Fans were vocal, and streamer Asmongold's video "Xbox just abandoned Halo" drew nearly 1.4 million views.

In the same shake-up, Activision also took over Rare, the studio behind Sea of Thieves, and World's Edge, which runs the Age of Empires series. Obsidian, the developer of The Outer Worlds, was moved under Bethesda, and Playground Games and Turn 10 were merged into a single studio for Forza and Fable. Another 268 roles were cut across Halo Studios, other first-party studios and management. Booty said that, including the studios leaving Xbox, the restructuring was "roughly three-quarters of the way" done. Also on September 22, Undead Labs became an independent, employee-owned studio. State of Decay 3 is due in 2027 from a new publisher that has not been named yet.

Ninja Theory fared the worst. In June, studio head Dom Matthews explained that he had personally shelved the team's other project, the horror game Project: Mara, so that "all 85 creatives" could work on Senua, the next Hellblade game. Three months later, Booty wrote: "Unfortunately, two separate agreements for Ninja Theory fell through. We will now begin consultation with employees on a proposed closure while continuing to explore other paths forward." On October 5, Ninja Theory staff began posting that their jobs were at risk. "It's incredibly sad knowing that we won't get to finish what we were working on," wrote gameplay programmer Katrin Mair. The studio has not been sold, and as of October 15 it has not officially been closed either. The fate of the Senua project is unknown.

The cuts drew reactions well beyond Ninja Theory. "Promoted and laid off in the same week is pretty wild," Halo Studios cinematic director Josh Daniels wrote on LinkedIn. In mid-September, shortly before the cuts, Sharma had told The Wall Street Journal that her motto was "clarity is kindness." Shannon Loftis, the former head of World's Edge who left Microsoft in 2022, replied in a since-deleted Threads post: "I guess Damocles' Sword is a form of clarity, what do I know?" A few days after the cuts, Microsoft CEO Satya Nadella said on the Sources podcast that "there's some amount of streamlining the team is doing, and Asha is doing, which is great to see."

The September cuts even reached the team that had just finished Xbox's big console exclusive for this fall.

Juan Vaca, story director on Gears of War: E-Day, lost his job in the September layoffs, just days after the game went gold. On October 6, E-Day launched and immediately sparked a debate over whether Game Pass hurts game sales.

E-Day, which opened in early access on October 1, is an Xbox console exclusive, and Microsoft stressed that the exclusivity is "not timed." On PC, including Steam, the game launched the same day as on Xbox and was on Game Pass from day one. Critics liked it: as of October 15, the Xbox version had an 88 on Metacritic, and the game had an 86 on OpenCritic. According to Circana, on launch day E-Day was the fourth most-played game on Xbox worldwide, behind Fortnite, Roblox and NBA 2K27.

Sales are a different story, and Microsoft does not disclose them. Alinea Analytics estimated on October 9 that E-Day had sold about 230,000 copies, with 168,000 on Steam and 62,000 on Xbox consoles and the Xbox app on PC. Another 1.7 million people played it through Game Pass, and 722,000 of them paid $30 for early access. In total, Alinea estimates, players spent about $37 million on E-Day, roughly $11 million of it on Steam, where Valve takes its cut.

Alinea analyst Rhys Elliott argues that Game Pass cost the game sales. In his view, many of the 722,000 who paid for early access would otherwise have bought the game at $70. That argument has a weak spot. Subscribers pay Microsoft every month, but there is no public breakdown of that money by game, so outsiders can't calculate how much E-Day earned with Game Pass factored in. Platform matters too: E-Day has no PS5 version. Gears of War: Reloaded, a 2025 remaster that also launched straight into Game Pass on Xbox and PC, sold over 70% of its copies on PS5, according to Alinea's April 2026 estimate. Gears has buyers on PlayStation, but E-Day isn't there.

Two other figures have been circulating. Insider Tom Henderson said on a podcast that he had heard E-Day's budget was "upwards of $400 million." Microsoft has never said how much the game cost, so the figure remains unconfirmed. And "320,000 copies" was a Kotaku typo that swapped two digits in the same 230,000 estimate. The site corrected it on October 10.

But E-Day's sales weren't the only question hanging over Xbox. A bigger one was whether Microsoft would sell Xbox at all.

By the fall, talk of Microsoft selling Xbox had grown loud enough that Sharma addressed it herself. "Xbox is not for sale," she told The New York Times on September 30. "We will do whatever it takes to set the company up for success, and we will look at the right partnerships, the right operating model, and everything needed to achieve that."

She stopped short of promising that nothing would change. Back in June, The Information reported, citing sources, that Microsoft had no immediate plans to split Xbox off but hadn't ruled out making it a separate company that Microsoft still fully owns (a wholly owned subsidiary), which could make it easier to sell. Also on September 30, former Sony Interactive Entertainment America CEO Shawn Layden went on The Expansion Pass podcast and compared Xbox's position to the moment Sega abandoned the Dreamcast.

On October 6, Sharma spoke at an all-hands meeting. According to a transcript obtained by Windows Central, she said that "after an all time low, we've started to return to growth." The outlet noted that she was referring to Microsoft's own games, not the business as a whole. In Microsoft's latest earnings report, overall Xbox revenue was still down. Sharma also said, per the same transcript, that the next hardware generation would be "a family of devices," but that "we will certainly have a great console first."

On October 8, Xbox launched a new division called XP, a play on "experience points." It covers everything beyond the games themselves, from film and TV adaptations to merchandise, sponsorships, events and even theme parks. The division is led by Kayleen Walters, an executive producer on the film A Minecraft Movie. It's a fitting name, since Xbox now plans to earn experience points in places where you don't have to play anything at all.

None of that settled whether Xbox is dying, though.

This year, the debate flared up in the winter, and even people who helped build Xbox are on opposite sides of it. In February, Seamus Blackley, who co-created the original Xbox, said he expected the new CEO to serve as "a palliative care doctor who slides Xbox gently into the night." He added: "Xbox, like a lot of businesses that aren't the core AI business, is being sunsetted. They don't say that, but that's what's happening." Former Xbox executive Peter Moore pushed back. "I saw Seamus's comments. I hope he's a little misguided," he said.

Layden went furthest with his comparison. The Dreamcast, home of Shenmue and Jet Set Radio, was Sega's last console, and in 2001 the company stopped making hardware and started publishing games for its former rivals' systems. Asked what he would tell Sharma, Layden said: "This is your Dreamcast moment, when Sega decided we're just going to be on PS2 and we're going to get out of the hardware business and just be a great software company. It can be done. It's been done before. So, that's my advice. Pick a lane." In Layden's view, the biggest publisher in the world almost has to be on every platform, while a platform holder needs exclusives, and "you can't be successful at both."

But I think the Dreamcast comparison misses one key difference. When Sega announced its exit from hardware on January 31, 2001, it was forecasting a net loss of $502 million, which would be its fourth straight annual loss. By then, the Dreamcast had sold about 6.5 million units. Microsoft's internal numbers still put Xbox slightly in the black (about 3 cents left over from every dollar of revenue, according to the June forecast), and its owner is one of the richest companies in the world.

Xbox's leadership says it isn't giving up on consoles. "We have no desire to move away from the console business," Xbox chief strategy officer Matthew Ball said in a June interview with The Game Business. Nadella says Microsoft wants to do both: on September 25, five days before Layden's remarks, Nadella said on the Sources podcast that "we want to be a great publisher and a great platform provider for games across both PCs and Xboxes." Whether that works is an open question. In 2026, Microsoft is releasing its games on PlayStation, bringing back exclusives and building a new console all at once. In RPG terms, it's one character with points in both the mage and warrior skill trees, and builds like that tend to be either brilliant or useless.

What points to a crisis:

What argues against the idea that Xbox is dying:

Xbox's biggest rival has had a rough year too. For the full picture, read about every Sony failure and controversy of 2026.

You could argue about this forever, but the calendar will deliver the first answers, and it's already set.

The first tests of Sharma's decisions are coming this fall.

On October 23, Call of Duty: Modern Warfare 4 launches as the first Call of Duty that, under the new rules, won't be on Game Pass on day one. Sales estimates for it will show whether players go back to buying Call of Duty instead of waiting for it to arrive on Game Pass. If you're a subscriber, will you buy it at launch or wait until the 2027 holiday season?

Modern Warfare 4 is also coming to Switch 2, which makes it the first Call of Duty on a Nintendo console in nearly 13 years. And it is an important release for a series coming off a tough 2025. According to Circana, Black Ops 7 finished fifth in US sales for 2025, while Battlefield 6 took first place. Before 2025, the last shooter to outsell Call of Duty over a full year in the US was Gears of War, back in 2006.

On October 28, Microsoft reports results for July through September. CFO Amy Hood has said she expects Xbox content and services revenue to fall by a few percent ("in the mid-single digits"), with hardware revenue down too.

On November 15, Xbox turns 25. The original console launched in North America on that day in 2001 at $299.99. That makes the anniversary Series X25, at $899.99, three times as expensive (not adjusted for inflation).

On November 19, GTA 6 launches, and Circana's Mat Piscatella wrote in October that it could soften the drop in US console sales, though much will depend on supply and prices.

Through the end of the year, the consultations at Arkane are expected to continue, Microsoft says, but it has given no timeline for a decision on Ninja Theory. Sharma expects Xbox to return to growth by the end of June 2027. Fable (now set for February 23, 2027) and State of Decay 3 are due next year, and developers are expected to get their first Project Helix hardware then.

Still, these are only the near-term tests, and Xbox's new console doesn't even have a release date yet.

The numbers can't yet tell us whether Xbox is dying. It still brings in $21.8 billion a year, though 7% less than the year before. In her July memo, Sharma admitted that while Game Pass, multiplatform releases and a broader portfolio of content "have created meaningful value," they "did not grow at the pace we expected." Xbox has since begun reworking that strategy.

For 25 years, Microsoft kept investing in Xbox, and in 2026 the bill came due. So the question I'd ask isn't whether Xbox is dying but whether it can pay that bill. Sharma herself warned in the same memo: "History is full of companies that mistake longevity for inevitability. We will not be one of them."

The next big test is Project Helix, and developers aren't due to get even early hardware until 2027. Twenty-five years ago, Xbox started with its own console and a Halo made in-house. Now that the next Halo is in another team's hands and the new console still has no release date, what will Xbox look like by its next big anniversary?

Let us know what you think in the comments.

Quick answers to common questions about Xbox in 2026.

Microsoft has announced no such plans and is developing a new console, Project Helix. On September 30, 2026, Xbox CEO Asha Sharma also said Xbox is not for sale. At the same time, Xbox is cutting costs. By the end of June 2027, it plans to shrink its team by about 3,200 people (including staff at departing studios). Three studios have already left, and Ninja Theory faces a proposed closure.

In the US, Game Pass Essential costs $9.99 a month, Premium $14.99, Ultimate $22.99 and PC Game Pass $13.99. On April 21, 2026, Ultimate dropped from $29.99 to $22.99. Prices vary by region.

In the US, as of August 1, 2026, the Series X with a disc drive costs $799.99, the Series X Digital $749.99, the 512 GB Series S $499.99 and the 1 TB Series S $599.99. Microsoft blames the higher prices on rising memory and storage costs.

Yes, but not on day one. According to Xbox, it will come to Game Pass in the 2027 holiday season. Under rules introduced in April 2026, new Call of Duty games join Game Pass Ultimate and PC Game Pass about a year after launch. Modern Warfare 4 launches on October 23, 2026.

Not officially, as of October 15, 2026. Two deals to sell the studio fell through, and Microsoft began consultations with employees on a proposed closure while continuing to look for other options. Some staff have posted online that their jobs are at risk. There's no word yet on what happens to Senua, the next Hellblade game.

Microsoft says yes. The next Xbox console is codenamed Project Helix and will use a custom AMD chip. Microsoft plans to ship early hardware to developers starting in 2027 but has not announced a release date or price.

Microsoft has not released official figures. Alinea Analytics estimates that about 230,000 copies had sold as of October 9, 2026, and that another 1.7 million people played it through Game Pass, 722,000 of whom paid $30 for early access.