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Xbox Chief Admits Game Pass Growth Stalled as Platform Loses Millions of Subscribers

Jul 9, 2026

In a internal memorandum outlined to "revitalize" the brand, Xbox leadership admitted the gaming business is "not healthy," noting that massive investments—including Xbox Game Pass—have failed to yield expected returns. The memo stated that Microsoft must reinvent Xbox, revealing that while Game Pass once peaked at over 34 million subscribers, that momentum has since regressed with a notable drop in active users.

Xbox Chief Admits Game Pass Growth Stalled as Platform Loses Millions of Subscribers

Xbox CEO Asha Sharma outlined her plans to "revitalize" the business, which include massive layoffs and studio divestments. In a landmark memo announcing the sweeping restructuring, Sharma addressed the factors leading up to this moment, candidly admitting that the current gaming business is "not healthy," partly due to massive investments like Xbox Game Pass failing to yield expected returns.

The five affected teams were all acquired under former Xbox CEO Phil Spencer's tenure, including Arkane, which joined Microsoft through the ZeniMax Media acquisition. Microsoft had originally hoped that aggressively expanding its studio portfolio—culminating in a historic $69 billion purchase of Activision Blizzard—would supercharge the growth of its Xbox Game Pass subscription service. However, those high-stakes bets clearly fell short of anticipated projections.

She stated that Microsoft bet on initiatives such as Xbox Game Pass, bringing more titles to rival platforms, and a "broader portfolio of content" to fuel Xbox's growth. While she noted these efforts did create "meaningful value," she pointed out that a publicly traded company like Microsoft requires sustained growth—and these businesses simply "did not grow at the pace we anticipated."

"As this unfolded, our core business experienced a gradual decline, leading us to expand our teams and pour in more capital and time in hopes of achieving better outcomes," she explained. "Instead, the industry is now facing the most severe hardware crisis in its history."
"We must reinvent Xbox."

Launched in 2017, Xbox Game Pass was introduced as a groundbreaking, Netflix-like service from Microsoft, allowing subscribers to access all first-party Xbox titles and an ever-expanding library of games for a flat monthly fee. While the service garnered immense popularity, peaking at over 34 million subscribers before regressing, it has simultaneously faced long-standing skepticism from fans and industry experts regarding the long-term viability and sustainability of the subscription model.