Latest Xbox layoffs by Microsoft unveil worrying trend for Sony PlayStation rival

On Wednesday, when Xbox CEO Phil Spencer sent a memo to employees of Microsoft’s gaming arm to inform them about significant job cuts, he assured that it would position the video game business for future success. But global trends reveal some disturbing facts.

These layoffs came just weeks after Microsoft unveiled a new handheld console, ‘Xbox Ally’ and ‘Xbox Ally X’ in association with Asus. And not all are happy. Laura Fryer, one of the founding members of Xbox, reaffirmed something many gamers feared all along—the Xbox hardware dream is “dead”.

The Asus ROG Ally X—the base for Xbox Ally retails in India close to ₹1 lakh. In contrast, even Sony’s “overpriced” PlayStation 5 Pro is listed at around ₹79,000 on e-commerce outlets like Flipkart, despite not getting official releases in the country. The price point itself alienates the world’s populous market.

While Microsoft is yet to release the official layoff number, it said that just about 4 per cent of the workforce were being let go. Usually, the Xbox division is shielded from such layoffs, but the lacklustre sales of the new upgraded consoles seem to have finally caught up with them.

Microsoft is set to partner with AMD for its next generation of consoles. But the wait has been too much. The last generation of Xbox consoles—the Xbox Series S and the Xbox Series X—came out in November 2020, close to five years ago. In that time, PlayStation revised the PS5 with its slim versions in October 2023 and launched the PS5 Pro in November 2024.

The Xbox also got mid-gen upgrades. But they were mostly cosmetic and upgrading the base stage. Xbox Series S got a matte black finish variant and 1 TB of storage in September 2023. Both Series S and Series X got updated in October 2024—new 1TB Xboxes in white and a 2TB Xbox Series X in black. Sure, the motherboard got redesigned with a smaller system-on-chip and a better cooling mechanism. But are they even upgrades at this point? Any PC master builder would disagree.

PS5 Pro, in contrast, gets a 45 per cent faster GPU than the base PS5 GPU, and an image upscaling technology. And rumours of the incoming PlayStation 6 are already going around.

The layoffs of Microsoft creeping into Xbox seem to align with the company’s departure from hardware-focused consoles—something that rival PlayStation has stepped up.

Fryer called the current direction of Xbox “chaos”, even asking: “Is the flashy new [Xbox] Ally the real deal?

With Nintendo Switch 2 upping the game and the Steam Deck handheld taking the world by storm, this is one market Xbox is truly not prepared for. So when Fryer said, “There is literally no reason to buy this handheld!”, many gamers nodded in silent agreement.

“Obviously, as one of the founding members of the Xbox team, I’m not pleased with where things are today,” she said in the video. “I don’t love watching all of the value that I helped create slowly get eroded away. I’m sad because, from my perspective, it looks like Xbox has no desire [to] ship hardware anymore.”

“Personally, I think Xbox hardware is dead,” Fryer said.

This is true. There has been no clear strategy, no new Xbox hits, and the console lost many loyalists to PC and PlayStation over the years. The Game Pass, which is a subscription service, has been a great hit for the company, since many gamers see value in it. But Microsoft seems to have put all their eggs in that one basket. This led to the PS5 outselling the Xbox Series X/S by nearly a 5-to-1 ratio during most of last year.

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