Microsoft Has Reportedly Pushed Xbox Division to Hit 30% Profit Margins - News
by William D'Angelo , posted on 23 October 2025 / 4,600 Views
Microsoft has been pushing the Xbox gaming division to increase its profit margin, according to a new report from Bloomberg that spoke with people familiar with the business.
Executives over the past two years have set a goal of 30 percent "accountability margins," which is a term Microsoft uses instead of profit margins. The sources state Xbox division in order to reach these goals has canceled projects, raised prices, and cut thousands of jobs.
A 30 percent profit margin is above the averages seen in the video game industry that in recent years has ranged between 17 percent and 22 percent, according to estimates from S&P Global Market Intelligence. Profit margins at the Xbox gaming division have been between 10 percent and 20 percent over the past six years. Court documents revealed Xbox had a 12 percent profit margin through the first nine months of the 2022 fiscal year.
S&P Global analyst Neil Barbour stated the 30 percent goal is the outer range of what a gaming studio can reach in a boom year. "A 30% or better margin is usually reserved for a publisher that is really nailing it," said Barbour.
The Xbox gaming division in the past weren't asked to hit specific numbers, according to the people. Xbox was told to focus on making the best games possible without worrying too much on finances. However, that changed in fall 2023 when Microsoft Chief Financial Officer Amy Hood set the new target.
The new target has forced Microsoft Gaming CEO Phil Spencer to find ways to cut costs and increase profits. This has included releasing more games on rival platforms like Sony's PlayStation and the Nintendo Switch, cancelling games that includes Everwild, Perfect Dark and Project Blackbird, as well as closing studios and laying off thousands of employees.
Not every project at Xbox is expected to hit the 30 percent target, however, Xbox developers and groups have been told about the new goals, according to the people.
The sources claim the Xbox division will focus more on games that are more likely generate significant revenue windfalls or are cheaper to make rather, rather than taking riskier bets.
"We look at the business as a whole, balancing creativity, innovation, and sustainability across a diverse portfolio of offerings," said an Xbox spokesperson. "As with any creative business, sometimes that means making hard decisions and stopping work on things that are no longer working for a variety of reasons, and shifting resources toward the projects that are more aligned with our direction and priorities."
A life-long and avid gamer, William D'Angelo was first introduced to VGChartz in 2007. After years of supporting the site, he was brought on in 2010 as a junior analyst, working his way up to lead analyst in 2012 and taking over the hardware estimates in 2017. He has expanded his involvement in the gaming community by producing content on his own YouTube channel and Twitch channel. You can follow the author on Bluesky.
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This explains everything Xbox leadership has done over the past couple of years. They are being forced to increase profit margins no matter what.
The problem was always Microsoft. They are not a video game company, they only infiltrated the market, and the market is worse because of it.
Worse lol
Wait if they leave the market.
Exactly more competition is good for the market. There is no denying that xbox is on a horrible path right now though.
I wouldnt call expanding horrible lol
The X360 was a great system! the f#*ked up with the kinect being forced on us on the X1 and downhill ever since
Yes, but I also believe that this is likely an overcorrection after years and years and years of a mismanaged gaming business at microsoft. With mismanaged I don't mean that everything was bad for the consumer, but that there was a lot of investment with not enough growth and increasing profit margins to keep microsoft happy. Not excusing microsofts behaviour, just writing what I think has happened.
Well.......that explains a lot lol
This is going to push Xbox to cut everything but the highest selling games and IPs. Jesus we are going to be in a situation where some of the best gaming IPs are stuck with MS who wont do anything with them.
Well Keeper just hit a peak Concurrent user count of 191 on Steam, as the product of a studio with 105 employees that haven’t made any other games in the last 4 years. If I worked there I’d probably be preparing my CV.
Its on more platforms then just Steam, and is on GamePass
Yeah, I'm sure Steam is a massive outlier here and 1m people decided to buy it only on xbox.
Being on gamepass doesn't help the profit margin.
Doesnt have to. Its keeping 30m+ subscribers subscribed. Feeding them contact.
That did wonders for Tango
Unless Xbox deem that engagement on game-pass enough (for Keeper).... yeah, that's a loss. That game hasn't come anywhere close to earning back its development costs.
Its not a very expensive games. Its 4 hours long.
How much do you think it cost, exactly?
The studio is 105 people and it’s their only game in 4 years.
Ask them.
It's 1 of multiple games they are working on. Double Fine has said as much.
Sony Playstation have said something like "We're okay with only 1 out of 5 games being a huge success, and essentially paying for the other 4". They know people want games, that take risks and have unique experiances. Thus they are comfortable with allowing devs to experiment ect. Meanwhile Xbox is now saying they want 30% returns on everything? How many studios will they close? esp when the avg in the market is like 15-20%.
that is a huge number in company this size. we shoot for 20% in our small business
Very understandable for small business because you need a buffer for the unexpected. Anything past 10% for a huge company like Nintendo, Sony, or MS is just greed.
exactly!
....so this goal started sometime after MS bought Activision?
Was that the deal? MS buys Activision for Xbox, then in turn Xbox needs to bring in more money.
If that was the case then they definitely didn't predict this outcome lol
Apparently PlayStation's profits swing, and its like 13-21%...... How is Xbox really going to hit 30% ?
Jesus. First Don Mattrick and now Amy Hood. From TV to 30. It's just sad how they're willing to kill off the whole brand in order to reach short term targets.
Well, they were never in it for video games. They got their money originally because of Windows and other software applications. They only jumped into the gaming sphere because they saw dollar signs. They wanted to exploit it. To whore it out. To suck it dry, if possible, and then leave. So nothing they're doing now should surprise anyone. This is what they do.
Let me guess. Those goals are linked to Xbox senior management's job security and bonuses.
Corporate goals are usually tied to everyone bonuses top to bottom...
That shouldnt be a new revelation lol
Destroying their xbox brand for higher profits...
Step 1: Buy a large enough portion of the industry to make it impossible to NOT do business with you. Step 2: Price gouge everyone.
Xbox just can't catch a break
Profit is the excess left over after factoring all expenses for any given fiscal period/quarter/year. There should never be a "you're fired because we didn't make enough profit"
Penny pinching on one end during the development/marketing phase... And pushing sky-high prices on the other end.
Not a good situation for us consumers... Especially when potentially exciting projects get cancelled like Perfect Dark.
Art should dictate profits, not the other way around.
Ahhh...
So that's why a AA game like Outer Worlds 2 was trying to charge $80
Did Hi Fi Rush not reach those goals? It had to have hit a very respectable return?
Profit... At what cost?
So thousands of lives, technological advancements in the field and artistic expression are all affected because
some woman called "Amy Hood" said "company needs more money"
No wonder Mr. Spencer lost that weight, it's the stress
Late stage capitalism strikes again
The only good this will do is Nintendo getting their stuff more. Portable Halo, Starfield, Fallout, and Gears is the only good this will lead to.
