Phil Spencer, the head of Microsoft's gaming business, is departing the software giant after a 38-year tenure, a move that comes as the company's Xbox operations face increasing difficulties.
In an internal memo to staff released on Friday, Microsoft CEO Satya Nadella stated, "Last year, Phil Spencer decided to retire, and we have been discussing succession plans since then. I want to thank Phil for his outstanding leadership and partnership."
During the December quarter, revenue from Microsoft's gaming division declined by approximately 10% compared to the same period last year, a drop that exceeded the company's expectations. This occurred while the company's total revenue grew by nearly 17%. In January of this year, Microsoft announced an impairment charge of an undisclosed amount related to its gaming business.
In 2023, Microsoft invested $75 billion in the acquisition of Activision Blizzard, betting on the expansion of its gaming operations and launching the *Call of Duty* series via cloud services. However, sales of the current generation of Xbox consoles have lagged behind Sony's PlayStation and the Nintendo Switch. Microsoft has also shuttered development studios working on several new games.
Nadella noted in the memo that Spencer, who took the helm of Xbox in 2014 after leading Microsoft's game studios, nearly tripled the scale of the gaming business during his tenure. This growth was partly attributed to acquisitions like that of Activision Blizzard. Spencer also championed Microsoft's purchase of Mojang, the developer behind *Minecraft*.
"Over 38 years at Microsoft, including 12 years leading our gaming business, Phil has helped transform our business and the way we operate," Nadella wrote.
Asha Sharma, who joined Microsoft from Instacart in 2024, will succeed Spencer as the CEO of the gaming business, reporting directly to Nadella. She previously served as President of Products for Microsoft's core AI division, which is led by former Meta executive Jay Parikh. Before joining Instacart as Chief Operating Officer in 2021, Sharma spent four years as Vice President of Product and Engineering at Meta and had a prior two-year stint in marketing at Microsoft.
In an internal letter to the Microsoft gaming team, Sharma wrote, "We will refocus on our core Xbox fans and players—those who have supported us over the past 25 years—and on the developers who build vast worlds and experiences for gamers worldwide."
Sharma has been involved in developing AI products like Foundry, which help integrate AI models into third-party applications.
"As monetization models and AI evolve and shape the future, we will not chase short-term efficiency or flood our ecosystem with soulless AI content," Sharma stated. "Games were, and will always be, art—created by humans, powered by the cutting-edge technology we provide."
Matt Booty, head of Microsoft Game Studios, will report to Sharma in his role as Executive Vice President and Chief Content Officer.
Nadella expressed confidence, saying, "The combination of Asha's consumer product leadership and Matt's deep gaming industry experience positions us well to continue driving innovation in our platform and content pipeline."
Nadella also announced that Sarah Bond, President and Chief Operating Officer of the Xbox division, will be leaving Microsoft.
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