2 articlesAfter a series of controversial moves, with the recent Game Pass and Xbox development kit price hikes, Microsoft is caught yet again in another controversy.
This time, it involves the Xbox division, where the company is reportedly demanding even higher profits that far exceed the norm in the gaming industry.
A recent report by Bloomberg reveals that Microsoft has implemented a goal of 30% “accountability margins” which surpasses the gaming industry’s average profit margin of 17-22%. The goal was reported to be implemented by Amy Hood, Microsoft’s Chief Financial Officer, in fall 2023.
It was also revealed by 2023 court documents that Microsoft used to have a 12% profit margin for the first nine months of 2022.
The Continuing Investigation of Microsoft’s Activision Blizzard AcquisitionJan 21, 2026S&P Global Intelligence analyst Neil Barbour said that “a 30% margin or better is usually reserved for a publisher that is really nailing it.”
In case you’re wondering, the term “accountability margins” is a term used by Microsoft in place of profit margins.
This new directive has placed significant pressure on Xbox’s gaming division, prompting it to raise product prices, cancel long-term projects, and even lay off thousands of employees just to meet the new target.
The 30% profit margin goal is a stark contrast to how Xbox used to do things back in the day. Prior to the new directive, Xbox developers were able to prioritize creativity and game quality among everything else.
However, with the changes, the Xbox gaming division has been actively looking for ways to cut costs and boost profits as much as possible.
Project Cancellations, Layoffs, and a New Direction for Xbox
This year alone, Xbox has decided to scrap a handful of high-profile games such as Perfect Dark, Everwild, and Project Blackbird, despite being in development for at least 7 years.
While not every game is expected to hit the 30% profit target, many studios are now operating under tighter financial scrutiny.
Insiders suggest that games with long-term engagement potential, such as live-service or multiplayer titles, are being prioritized over riskier creative ventures.
This move also coincides with the statement of Xbox president Sarah Bond, who described the next-gen console as a “very premium, very high-end curated experience.” This could potentially mean a shift from previous Xbox iterations in favor of a more upscale product.
Microsoft’s aggressive push for profitability follows years of major spending in the gaming industry. Back in 2020, the company purchased ZeniMax for $7.5 billion, and in 2023, it spent $69 billion to acquire Activision Blizzard.
Despite all those acquisitions, Xbox still gets left behind by Sony and Nintendo in terms of exclusive titles and hardware sales.
Several analysts have estimated that Sony’s PS5 was able to sell more than twice as many units as the Xbox Series X, for example.
Despite all that, the new strategies surprisingly appear to work in the short term. In July this year, Amy Hood reported that Microsoft had a 34% year-over-year increase in operating income for its gaming division.
She attributed this growth to “continued prioritization of higher margin opportunities.” Microsoft will be making its next earnings report this October 29.
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