After Axing 3,200 People at Xbox, Microsoft President Asha Sharma Named US Federal Reserve Employment Advisor

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Xbox President Asha Sharma has been appointed to co-chair a Federal Reserve advisory group on employment and productivity. This appointment follows closely behind Xbox’s announcement of significant layoffs, a timing that has drawn considerable attention and reaction from within the video game industry. Kevin Warsh, chair of the Federal Reserve’s Board of Governors, officially oversaw Sharma’s appointment to this external working group. The Federal Reserve has established five task forces to advance its monetary policy. One of these groups specifically focuses on artificial intelligence and its impact on employment. This task force includes Sharma, along with Marc Andreessen, a prominent Silicon Valley investor, and Charles I. Jones, an economics professor at Stanford University. According to a Federal Reserve press release, this group will examine how new technologies, including AI, affect productivity, the labor market, and the U.S. economy. The findings are intended to inform the central bank’s economic analyses and guide future monetary policy decisions.

The timing of Sharma’s appointment has prompted significant reactions and strong criticism on social media. Many observers highlight the irony of the head of a division that recently enacted substantial job cuts now participating in a group focused on employment issues. This situation is seen by developers and gamers as symbolic of the contradictions prevalent in major tech companies today. Microsoft’s gaming division recently confirmed the elimination of approximately 3,200 positions at Xbox and its studios, contributing to a wider pattern of workforce reductions across the video game industry. This restructuring affects several first-party studios, including Compulsion Games (working on South of Midnight), Double Fine Productions, Ninja Theory, and Undead Labs (developing State of Decay 3). Microsoft stated that no previously announced titles or projects will be canceled due to these layoffs.

The Xbox restructuring involves moving four game development teams: Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Labs. Activision Blizzard, Bethesda ZeniMax, King Mojang, and Xbox Game Studios are among the divisions impacted by these cuts in Europe and other regions. The company’s plan involves 6,400 job cuts across Microsoft, representing just under 3 percent of its workforce of approximately 228,000 employees. Specifically within Xbox, about 1,600 roles were eliminated on July 7, with an additional 1,600 expected over the next year. These reductions are part of an estimated 4,800 position cuts within the gaming division, anticipated by early summer 2026.

Dave McCarthy is stepping down as Corporate Vice President of Xbox Product Services after 17 years. In an internal message on July 6, 2026, Asha Sharma explained that Xbox was operating at significantly lower margins compared to comparable platform and publishing businesses. This was attributed to entering the current generation with a smaller install base and a higher cost structure, coupled with a heavy reliance on Game Pass growth that did not meet expectations. The company describes this restructuring as a response to a broader industry-wide hardware crisis. Helen Chiang has been appointed Chief Operating Officer with Profit and Loss Responsibility at Xbox amidst these changes. Chiang brings two decades of experience, including leading Mojang and managing the Minecraft brand, and previously helping build the Xbox Live network. Her objective is to centralize business operations, ensure transparency in investments, and drive performance. McCarthy was recognized for his 17 years of service and his role in structuring online systems. The company maintains that these layoffs aim to strengthen the brand, promising increased investments and greater discipline in the coming decade.

The growing number of hires had previously led to a fragmented work environment at Xbox, where studios and departments often operated in isolation, hindering cooperation and delaying projects. To address this, the position of Director of Operations was created. This role grants Helen Chiang oversight of hardware, services, and game finances, reporting directly to Asha Sharma.

Sharma’s Federal Reserve Role Sparks Concerns Over Xbox AI Layoffs and Future Hiring

While this appointment does not mean Sharma will define U.S. employment policy, her participation in the advisory group risks fueling further debate, particularly given the current tense social climate surrounding Microsoft’s gaming division. Artificial intelligence is increasingly central to the strategies of major technology firms, including within the video game industry, as Microsoft invests in AI to enhance development tools and internal processes. However, many professionals are questioning the employment implications of this transformation amidst ongoing layoffs. Independent studios were closely monitoring the performance of studios like Ninja Theory and Undead Labs, as Microsoft has determined that full-time ownership of every studio is not financially sustainable. AI tools are also impacting how game studios budget content, a factor linked to broader industry layoffs expected in 2025 and 2026 due to spending on AI infrastructure. Investor reaction to the specific Xbox job cuts was minimal, and further changes are anticipated.

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