Microsoft is reportedly pushing its Xbox gaming division to deliver profit margins of 30%, a target well above industry averages, as part of a company-wide profitability drive that has already triggered mass layoffs, studio closures and the cancellation of long-running projects.

According to Bloomberg, Microsoft Chief Financial Officer Amy Hood introduced the new “accountability margin” target in late 2023 as executives sought to boost returns from the company’s gaming arm, which includes dozens of studios acquired during a years-long spending spree.

The goal has forced Xbox boss Phil Spencer to refocus the business around cheaper, higher-yield titles while cutting riskier, more experimental projects.

Analysts say the 30% benchmark is unusually high for the gaming industry, where average margins range between 17 and 22%, according to S&P Global Market Intelligence.

Xbox’s margins have hovered between 10-20% over the past six years, with court filings revealing just 12% profitability through most of fiscal 2022.

Bloomberg’s sources said the push for higher profits has come at a cost.

In the past two years, Microsoft’s gaming division has axed thousands of staff and shuttered or shelved several high-profile titles, including Everwild, Perfect Dark and Project Blackbird.

The strategy shift has also led to Xbox games being launched on rival platforms such as Sony’s PlayStation and Nintendo Switch, breaking from the brand’s traditional exclusivity model.

The move comes amid growing internal scrutiny of Xbox following Microsoft’s acquisition of Activision Blizzard in 2023 and ZeniMax in 2020.

With Microsoft now investing heavily in generative AI, insiders say the company is less tolerant of underperforming divisions.

An Xbox spokesperson said the company continues to take “a long-term view” of its gaming business, balancing creativity and sustainability.

“As with any creative business, sometimes that means making hard decisions and shifting resources toward projects more aligned with our priorities,” the spokesperson said.