For Windows readers, one detail stands out. A turf war between the Xbox and Windows teams over what software should power Project Helix is a Windows story as much as an Xbox one.
Who is actually running Xbox
Microsoft's February 20 announcement named Sharma CEO of Microsoft Gaming, reporting to Nadella. Matt Booty became chief content officer. Phil Spencer retired and Sarah Bond left. Microsoft later noted that, as of April 23, the division was renamed XBOX and Sharma's title became CEO XBOX.
Nadella appointed her and remains Microsoft's chairman and CEO. He is not running Xbox day to day. Fortune describes Sharma as 38, with no prior game-industry experience. Before Xbox she led product for the group behind Microsoft's AI Foundry platform and worked on products for GitHub Copilot. Earlier she held roles at Meta and Instacart.
The Nadella framing also gets two specific points wrong:
- Fortune does not report a 30 million Game Pass subscriber figure.
- Fortune does not describe the strategy as mainly decoupling Xbox from the console. The reported emphasis is on hardware, franchises and the Xbox identity.
The state of the business, as Fortune reports it
The picture Fortune paints is not flattering. The figures below are attributed estimates, not audited Microsoft disclosures.
- Console share: Current-generation Xbox consoles have sold a little over a third as many units as PlayStation 5, per third-party estimates. Treat that as an outside estimate.
- Margin: Fortune says a Microsoft measure of Xbox profit margin has been around 3%. That is far below competitors and below what CFO Amy Hood normally expects from a major business.
- Console weight: Former employees say the console still accounts for about 80% of the business. Fortune does not present that as a Microsoft-reported number.
- Scale: Fortune calls Xbox a $21 billion business. The Activision Blizzard purchase made it Microsoft's third-largest business by revenue.
- Game Pass: Former employees say it built a subscription business but cannibalized sales of higher-priced first-party games, especially around launch. They also cite competing internal metrics, such as subscription revenue versus store revenue.
These are employee accounts, not an audited finding. They are still a coherent explanation of why a reset was needed.
What is reported versus what is confirmed
Fortune mixes reported plans with confirmed facts, so it is worth sorting them.
Reported, not announced by Microsoft:
- A Game Pass overhaul in which players choose features à la carte, such as console-only games, cloud gaming and multiplayer, within a tiered structure. Fortune attributes this to people familiar with the strategy.
- A next-generation handheld by the 2027 holiday season and a next console by the 2028 holidays. These release windows have not been formally confirmed by Microsoft.
- An internal Helix price projection of $1,200 to $1,800 unless Microsoft subsidizes it. For comparison, the Xbox Series X with a disc drive currently sells for $799.99 after recent price hikes, according to TechPowerUp. This is an internal projection, not a retail price.
Confirmed by Microsoft:
- The March 11 GDC post from Jason Ronald, VP of Next Generation, confirms that Project Helix is a next-generation first-party console. It is designed to play Xbox console and PC games and is powered by a custom AMD SoC. Microsoft said it plans to ship alpha hardware to developers starting in 2027. It gave no consumer price or launch date.
- The same post said Xbox mode would begin rolling out to Windows 11 in select markets in April. It also said the Xbox Play Anywhere catalog had passed 1,500 games.
Sharma has also said Helix will be "a family of devices", which suggests multiple models. Last August she stressed affordability. A $1,200 to $1,800 projection sits awkwardly beside her remark that it is hard to imagine mass audiences can afford thousands of dollars for a console generation. That tension may explain the "unless subsidized" caveat.
The Windows angle: who controls Helix's operating system?
This is the part that belongs on a Windows site. Fortune reports that the two teams clashed over what software should run Project Helix, with Windows leaders wanting the handheld to use a trimmed-down Windows Home. Sharma's team wanted to build and control its own software for the best gaming performance.
Tensions reportedly ran high enough that a senior Xbox executive threatened to scrap the handheld rather than adopt the Windows build. Fortune says Xbox now largely controls the direction of the operating system for the project. Sharma stressed that collaboration continues: "We can't build Helix on our own."
Two caveats apply. The clash comes from people briefed on it, and Microsoft has not described the Helix software stack in these terms. Microsoft's own messaging also points both ways. It talks about breaking down barriers between console and PC, and about bringing a gaming-OS experience into Windows 11 through Xbox mode. How much of Helix is Windows underneath, and how much is Xbox-owned, is still an open question.
For PC gamers, it matters whether Xbox-controlled software means a console that plays PC games on a locked-down shell or something closer to a Windows PC. Microsoft's "play your Xbox and PC games" wording leaves room for either.
The restructuring: reported targets and confirmed actions
Fortune reports that Sharma has cut 1,868 people as part of plans to reduce headcount by 3,200 over the next year. Further rounds are reportedly planned for October, November and January. Fortune notes that layoff plans can change, so the target should not be read as completed cuts. It also reports that structuring the cuts in waves has left some staff demoralized.
Microsoft's own confirmed update comes from Matt Booty's September 22 message to employees:
- 268 roles eliminated across Halo Studios, other first-party studios and central functions.
- Restructuring roughly three-quarters complete.
- Activision expands to cover World's Edge and Rare, and will develop the next Halo title with a new team.
- Bethesda takes on Obsidian, and King takes on Microsoft Casual Games.
- Playground and Turn 10 merge into one studio for Forza and Fable.
- Compulsion and Double Fine returned to management with their IP, back catalogs and runway funding.
- Undead Labs moved to a new publisher and will release State of Decay 3 on Game Pass at launch.
- Two proposed agreements for Ninja Theory fell through, so consultation on a proposed closure begins.
- Consultation with Arkane continues through the end of the year.
These are stated plans as of September 22. They are not proof that every proposed closure has happened.
Franchises first
Fortune says resources are shifting from smaller studios toward Xbox's biggest franchises, with the goal of more frequent major releases. It reports that Xbox is planning more platform-exclusive games and names Gears of War: E-Day, launched October 6. Developer Brian Fargo told Fortune studios now need an "investable business case" rather than blank-check funding.
Sharma has also created a new arm to centralize commercial opportunities for franchises like Minecraft, in the style of Disney's Marvel playbook. Another team will explore new ways to create and distribute games across devices using AI. Sharma told Fortune she won't use "AI for AI's sake." She sees it as a tool for specific engineering and workflow problems.
Is Xbox being prepared for sale?
Fortune says several current and former staff believe Xbox is being prepped for a sale, spinoff, outside investment or subsidiary conversion. Some cite a high-level presentation exploring such scenarios. As evidence, they note that staff email addresses moved from microsoft.com to xbox.com and that the Microsoft Gaming name was dropped.
Microsoft's side of this is on the record. Judson Althoff said Xbox is valuable to Microsoft's wider business. He said its low-latency demands stress-test Microsoft's cloud, and that it maintains retail relationships and reaches creators through Minecraft. He added: "We would not have put her on a business we intend to sell." He also conceded there will be speculation and that time will tell. Sharma answered the same question this way: "I think that we're going to be an important part of Microsoft for a very long time."
NYU professor Joost van Dreunen offers the counterargument. If AI spending forces Microsoft to shed non-AI businesses, Xbox would become increasingly attractive to sell. That is one analyst's view, not a report of a decision. This is unresolved speculation, and nothing in the evidence shows Microsoft has chosen to sell or spin off Xbox.
What to watch
- Earnings: Fortune says the next test is Microsoft's quarterly earnings report this month. Sharma expects financial improvement to show in fiscal 2027.
- Usage: Fortune reports about 100 million daily active users against a long-term goal of more than 1 billion. It also says active console usage has rebounded year over year.
- Pricing: Watch for any official Helix pricing or subsidy signal, given memory and storage costs.
- Game Pass: Watch whether the à la carte tiers are formally announced.
- OS question: Watch for official language on whether Helix devices run a Windows build or an Xbox-controlled OS.
Bottom line
The viral framing of a cloud-obsessed CEO who doesn't play games gets the person and the strategy wrong. The better-supported story is a first-time CEO from AI and consumer-tech backgrounds who is cutting staff, consolidating studios and betting on franchises and new hardware. Much of the most interesting detail rests on anonymous sources, so the Game Pass redesign, the dates and the price range should stay labeled as reports until Microsoft confirms them. For Windows users, the Xbox–Windows fight over Helix's operating system may turn out to be the most consequential thread.