Microsoft’s Sky-High Profit Goals For Xbox May Be Doing More Harm Than Good – Report

2025 has been a tumultuous year for the Xbox brand, with massive layoffs, multiple price hikes for both its console portfolio and Game Pass subscriptions, and continued controversy over Microsoft’s work with Israel casting a shadow over the company’s gaming wing. A new report from Jason Schreier at Bloomberg has shed some light on what’s going on behind the scenes at Xbox, and a lofty profit goal looks to be the catalyst for these decisions.

According to the report, for the past two years, top executives have set an “across-the-board [profit margin] goal of 30 percent.” The report says that the new target was set by Amy Hood, Microsoft’s chief financial officer, whose team has “taken a larger role in the gaming business in recent years.”

For context, as Schreier reports, estimates from S&P Global Market Intelligence mark the average profit margin for the entire video game industry at between 17 percent to 22 percent since 2018, with Xbox specifically coming in between 10 and 20 percent.

Bloomberg’s report also indicates that the requirement for Xbox first-party games to be available on the Xbox Game Pass subscription service has hurt software sales overall. However, Xbox has employed a “member-weighted value” credit system which, as the report states, “is calculated based on several factors, such as the number of hours that Game Pass players collectively spend on a particular title.”

Part of Xbox’s new strategy has been releasing first-party games on competing consoles. Indiana Jones and the Great Circle, Sea of Thieves, and Forza Horizon 5 have all launched on PlayStation 5 in recent months, with notable success according to sales figures.

Those familiar with the situation told Bloomberg that “moving forward, games that are either cheap to make or deemed more likely to generate significant revenue windfalls may take priority over riskier bets.” Xbox has cancelled multiple projects recently in pursuit of this 30 percent goal, with Rare’s Everwild, The Initiative’s Perfect Dark, and Zenimax’s Project Blackbird–all of which were in development for nearly a decade–among the biggest cancellations.

Microsoft’s next earnings report is currently scheduled for October 29. Before that, the next installment in Xbox’s flagship Halo franchise is set to be unveiled October 24 as part of the Halo World Championships.