^{Photo: Ars Technica}

End of an Era for Xbox Leadership

Phil Spencer is retiring from Microsoft after a 38 year career, closing one of the longest and most influential tenures in the company’s history. The announcement, shared internally by CEO Satya Nadella, follows months of succession planning and comes at a pivotal moment for the Xbox business.

Spencer, who led the gaming division for more than a decade, is widely credited with reshaping Microsoft’s gaming strategy, expanding its global footprint, and integrating hardware, software, and content into a unified ecosystem. Under his leadership, the division grew substantially, driven by major acquisitions, subscription services, and a push into cloud gaming.

A New Leader With an AI Background

Taking over the gaming division is Asha Sharma, who joined Microsoft in 2024 and most recently served as president of product within the company’s Core AI group. She previously held senior leadership roles at Instacart and Meta, bringing a blend of platform, commerce, and artificial intelligence experience.

Sharma will assume the role of CEO of Microsoft Gaming, overseeing a business that spans console hardware, game development studios, cloud services, and subscription offerings. In her first message to employees, she emphasized a dual focus on innovation and creative integrity, highlighting the importance of keeping games human centered even as AI tools become more embedded in development and distribution.

Financial Pressures and Market Competition

The leadership change arrives as Microsoft’s gaming segment faces near term headwinds. Revenue from gaming declined roughly 10 percent year over year in the December quarter, underperforming internal expectations, even as the company’s overall revenue rose about 17 percent.

Competition remains intense, with Sony’s PlayStation platform and Nintendo’s Switch continuing to command strong global demand. Meanwhile, Microsoft has undertaken restructuring efforts, including studio closures and an impairment charge tied to its gaming operations earlier in the year.

The company’s long term strategy still hinges on its landmark $75 billion acquisition of Activision Blizzard, a deal that significantly expanded its content portfolio and strengthened franchises such as Call of Duty across console and cloud platforms.

Spencer’s Lasting Impact on the Gaming Business

During his tenure, Spencer oversaw a transformation that nearly tripled the size of Microsoft’s gaming unit. He championed the acquisition of major studios, including the purchase of Mojang, the creator of Minecraft, and helped position Game Pass as one of the industry’s leading subscription services.

He also played a key role in convincing Microsoft’s leadership to double down on gaming at a time when some investors questioned whether the company should exit the console market altogether. By consolidating product, platform, and content teams, Spencer helped create a more cohesive strategy that aligned hardware innovation with software and services growth.

Leadership Changes Across the Division

As part of the transition, several organizational shifts are underway. Matt Booty will continue overseeing game development as executive vice president and chief content officer, reporting to Sharma. Meanwhile, Xbox president and COO Sarah Bond is departing the company, though she and Spencer will advise during the transition period.

These changes follow a broader wave of executive movement across Microsoft over the past year, reflecting a company wide push to align leadership with its next phase of growth centered on artificial intelligence and platform ecosystems.

What This Means for the Future of Xbox

Sharma’s appointment highlights Microsoft’s intention to integrate AI more deeply across its gaming platform, from developer tools and player experiences to monetization and discovery. At the same time, leadership has reiterated its commitment to console hardware and the core gaming community, signaling that traditional gaming experiences will remain central to the brand.

As the gaming industry shifts toward subscription models, cross platform ecosystems, and cloud delivery, Microsoft’s new leadership will be tasked with balancing innovation with profitability. With hundreds of millions of players across its ecosystem and one of the largest content libraries in the industry, the company’s next chapter will likely shape the competitive landscape for years to come.