Microsoft’s gaming division is undergoing a significant leadership transition as Phil Spencer, head of gaming, departs after a 38-year career at the tech giant. This move comes at a pivotal moment for Xbox, which faces increasing headwinds in a competitive market.
Microsoft CEO Satya Nadella announced Spencer’s retirement in a memo to employees, stating that succession planning had been underway since Spencer made the decision to retire. “I want to thank Phil for his extraordinary leadership and partnership,” Nadella wrote. Spencer’s departure follows a series of other high-profile exits from Microsoft in 2025, including business development chief Chris Young and GitHub CEO Thomas Dohmke. Charlie Bell, a key figure in Microsoft’s security leadership, also transitioned to an individual contributor role earlier this month, signaling a broader strategic realignment within the company.
The gaming sector at Microsoft has shown signs of strain. Revenue from video games saw a decline of approximately 10% in the December quarter compared to the previous year, a steeper drop than anticipated, even as Microsoft’s overall revenue climbed by nearly 17%. In January, the company disclosed an unspecified impairment charge related to its gaming business, indicating potential challenges in asset valuation or future revenue projections.
Microsoft’s substantial $75 billion investment in acquiring Activision Blizzard in 2023 was a clear signal of its ambition to bolster its gaming footprint. The integration of major franchises like Call of Duty, with efforts to deliver them as cloud services, highlights this strategy. However, the current generation of Xbox consoles has not achieved the market dominance seen by competitors such as Sony’s PlayStation and Nintendo’s Switch. This has coincided with strategic decisions to shutter studios, raising questions about the long-term development pipeline and the viability of certain game projects.
During Spencer’s 12-year tenure leading Microsoft’s gaming division, the business experienced significant growth, nearly tripling in size. This expansion was partly fueled by strategic acquisitions, including Activision Blizzard, and a pivotal decision to acquire Mojang, the developer of Minecraft. Nadella acknowledged Spencer’s transformative impact, stating, “Over 38 years at Microsoft, including 12 years leading Gaming, Phil helped transform what we do and how we do it.”
Spencer’s leadership was instrumental in navigating a period when Xbox’s future was uncertain. Following Nadella’s appointment as CEO in 2014, and with Sony outselling Microsoft in console hardware, the idea of spinning off consumer-facing assets like Xbox had been discussed by investors. At the time, analysts estimated the division could be facing losses exceeding $1 billion annually. Spencer notably championed the consolidation of Microsoft’s disparate hardware, software, and game development units into a unified gaming organization, a move that proved critical in shaping Xbox’s strategic direction.
Taking the helm from Spencer will be Asha Sharma, who joined Microsoft in 2024 from Instacart. Sharma’s appointment as Executive Vice President and CEO of Gaming, reporting directly to Nadella, marks a new chapter. Previously, she served as president of product for Microsoft’s Core AI business, a unit led by former Meta executive Jay Parikh. Sharma’s background includes significant roles at Instacart as chief operating officer and prior experience at Meta, where she spent four years in product and engineering leadership, as well as a previous marketing stint at Microsoft.
In her message to Microsoft’s gaming employees, Sharma emphasized a renewed commitment to the core Xbox community and developers. “We will recommit to our core Xbox fans and players, those who have invested with us for the past 25 years, and to the developers who build the expansive universes and experiences that are embraced by players across the world,” she stated. Sharma also touched upon the evolving landscape of gaming, particularly the impact of AI and new monetization strategies. “As monetization and AI evolve and influence this future, we will not chase short-term efficiency or flood our ecosystem with soulless AI slop,” she asserted. “Games are and always will be art, crafted by humans, and created with the most innovative technology provided by us.” Sharma affirmed that Microsoft will continue its dedication to console gaming, a commitment that began with the original Xbox in 2001.
Under Sharma’s leadership, Matt Booty, head of Microsoft’s gaming studios, will assume the role of Executive Vice President and Chief Content Officer, reporting directly to Sharma. Nadella expressed confidence in their combined expertise, stating, “Together, Asha and Matt have the right combination of consumer product leadership and gaming depth to push our platform innovation and content pipeline forward.”
Simultaneously, Sarah Bond, president and operating chief of the Xbox unit, will be departing Microsoft. Bond conveyed her support for Sharma, noting in a message to Xbox employees, “I’ve had the privilege of spending time with Asha over the last few weeks as we’ve planned for this transition, and I’ve seen firsthand her deep commitment to our players, developers, and brand.” Bond highlighted Sharma’s extensive experience in technology and commerce, along with her proven ability to scale platforms. Both Bond and Spencer have committed to assisting Sharma during the transition period.
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