Multiple media reports say that Microsoft (MSFT) is considering spinning off its troubled Xbox video game unit.
The Information was the first to report that Microsoft is considering several options for its Xbox gaming unit, including a potential spinoff or restructuring as a wholly owned subsidiary. News of the potential spinoff comes after reports surfaced earlier this week that Microsoft is considering layoffs at the Xbox division.
Additional media reports say that Microsoft executives are debating whether to create a new video game joint venture with other partners as it prepares to overhaul the Xbox unit, a move that could make the gaming business easier to sell in the long run.
What’s Wrong with the Xbox?
As my colleague William White reports, Xbox CEO Asha Sharma has warned that the gaming division expects its revenue to fall by 3% year-over-year in 2026. The decline is due to several factors, including inconsistent video game releases that have disappointed consumers and hurt sales.
While exact numbers haven’t been made public, reports say that Microsoft is planning a sizable layoff in the Xbox unit in July of this year. The unit is also going to see its marketing budget cut as the video game division undergoes a major restructuring under Asha Sharma, who took control of the gaming unit in February of this year.
Xbox sales have been sliding in recent years even though Microsoft spent a fortune to bolster the business with its $68.7 billion acquisition of Activision Blizzard in 2023.
Is MSFT Stock a Buy?
Microsoft’s stock has a consensus Strong Buy rating among 37 Wall Street analysts. That rating is based on 35 Buy and two Hold recommendations issued in the last three months. The average MSFT price target of $557.41 implies 21% upside from current levels.
