Microsoft Pushes Xbox Division for Higher Profit Margins

By Farouk Kannout | October 23, 2025 | 3:09pm

Video Games News Xbox

Microsoft Pushes Xbox Division for Higher Profit Margins

Over the past two years, Microsoft has pushed its Xbox gaming division to produce profit margins of 30%, according to a new report from Bloomberg. This goal significantly exceeds the average profit margin in the video game industry, which according to S&P Global Market Intelligence is between 17% and 22%.

This new goal for Xbox comes at a particularly difficult time for the gaming industry at large. Microsoft Chief Financial Officer Amy Hood implemented the 30% target in the fall of 2023, after Microsoft’s gaming division recorded a 12% profit margin for the first nine months of the company’s 2022 fiscal year.

This has significantly affected Xbox’s strategy, as the company looks for ways to reach this unlikely goal by cutting costs and boosting profits. “A 30% or better margin is usually reserved for a publisher that is really nailing it,” S&P Global analyst Neils Barbour told Bloomberg. Earlier this year, Xbox decided to cancel a number of more expensive projects, which had been in development for over seven years. The projects included Everwild, Project Blackbird, and Perfect Dark. Xbox’s flagship streaming service also just recently received a price hike in October of this year, all continuing the company’s trend of raising prices and slashing jobs over the past few years.

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While Xbox was once a key player in the console wars in the 2000s alongside Sony and Nintendo, the company has been losing in the hardware world since 2013 with the launch of the Xbox One. While Microsoft no longer reveals Xbox hardware sales, analysts estimate that the PlayStation 5 alone has double the unit sales of the Xbox Series X.

The company’s failure to develop exclusive titles compared to Nintendo and Sony’s libraries is a significant factor in this loss of sales. Xbox has since acquired more than a dozen different game companies in recent years to make up for this absence of original titles, including the largest gaming acquisition in history with Microsoft’s $69 billion purchase of Activision Blizzard. This spending has so far failed to yield the desired profits, and is causing increased scrutiny on Xbox from Microsoft executives, according to the Bloomberg report.

Xbox, PlayStation, and Nintendo have been the three primary consoles in games for so long that it can be hard to imagine the idea that any of them could disappear. It’s important to note, however, that many consoles had their rise and fall in the past, and Xbox may have to significantly shift its hardware plans in the future, leading to the end of this trifecta. Xbox President Sarah Bond said the company’s next console will be “a very premium, very high-end curated experience” in an interview with Mashable, suggesting this shift. The company is due to report its earnings on Oct. 29.