The Xbox camp's airwaves have been dominated by pessimism now for as long as I can remember.

For years and years, Xbox fans and employees alike have endured a rollercoaster of ups and downs for Microsoft's gaming brand. Whether it's layoffs, unpopular decisions, or external factors like the memory crisis — team Xbox can't catch a break. Things can't get any worse, right? Well ...

Much has been said about the callousness of this latest round of Microsoft layoffs, which hit the entire run of the company, as has become tradition almost every July now. It's painful knowing that these cuts and reductions won't solve the biggest problem facing Xbox, and traditional gaming platforms in general.

The eternal question: where will the next phase of real growth come from?

The attention economy is getting more saturated by the day

The uncomfortable truth for traditional video game platforms is that revenue is only growing by squeezing the existing user base. PlayStation, Xbox, Nintendo, and even Steam are basically trading the same fixed amount of users back and forth. Some estimates predict a contraction in gaming this year, owing to the memory crisis pushing prices beyond people's means.

The memory crisis won't be forever, but even after that, therein lies an existential question: huge swathes of younger cohorts have side-stepped Xbox, PlayStation, and even Nintendo, in favor of Roblox.

The Robloxification of gaming demographics cannot be overstated. Roblox has more monthly active users than Steam and Xbox combined, and double that of Minecraft. It's only when you throw in casual games like Candy Crush Saga that Xbox really begins to approach similar figures, but it obviously becomes a faulty comparison at that point.

It's also true that Roblox hasn't made a penny (yet). They're in their growth phase, burning cash on changing user behavior before jacking up prices — effectively the Spotify and Netflix model. Eventually, creditors will want to see returns, by which point Roblox hopes to have become the default gaming development platform. For many, it already has.

Xbox and PlayStation have grossly under-invested in younger cohorts, and Nintendo's insistence on gatekeeping their franchises behind hardware has limited their ability to reach younger audiences. The fact that traditional core games also take exponentially longer periods of time to produce means that youngsters might completely age out of titles that target them before they even ship, by which point trends will have changed, and tastes will have evolved.

Indeed, in our attention-anemic, hyper-infotainment, insta-gratification society, Roblox's "quick and dirty" game delivery model is perfect for the era. Games come and go in a flash, devouring the latest memes and in-jokes that baffle older generations and celebrate youth culture in ways God of War or Halo simply cannot tap into now.

For sure, Roblox's rise to dominance is less about gameplay quality or visual fidelity, but more about the social value Roblox offers that has made it a juggernaut. The vibes.

The fact Microsoft looked to a former Meta executive to run Xbox is likely no coincidence.

Can Xbox become ... COOL?

One criticism I have of Phil Spencer and, honestly, Microsoft in general is their utilitarian approach to product design. Xbox and Windows both have become sterile in recent years, with fun and quirky features relegated to memes and memories. Indeed, trends are cycling more quickly than ever, turbo-charged by artificial intelligence and short-form social media. That's perhaps not ideal if you're a corporation that moves as slowly as Microsoft, which also has no culturally relevant social media layer.

Therein lies Xbox's core problem. Putting the legal troubles and safety concerns to a separate discussion for now, Roblox has amalgamated social media and gaming into this amorphous digital monster that seems inaccessible to Microsoft and Xbox in general.

How can Xbox hope to become culturally relevant in an era where culture is now a chaotic revolving door? It was barely relevant to begin with, but in ages past it had the advantage of an era where corporations had greater control over content and context. Modern internet culture spawns from a vast and increasingly artificial digital ooze which bubbles up an occasional banger only for it to almost instantaneously deteriorate when corporations get their tasteless claws in. The rise of independent creation has corporations like Microsoft and Xbox completely locked out.

But Xbox does have one cube-shaped trick up its sleeve here ...

Xbox CEO Asha Sharma has stated that her short-term goal is to improve the situation for the core. Namely, older gen-z, millennials, and gen-x, who are pretty locked in their ways and want specific types of games and experiences. They aren't the future of the platform, though, nor are they the future of growth. We're aging out, getting old, having kids, and, ya know, dying to be blunt about it.

For Xbox to maintain competitive salaries against AI funny-money talent scouts and inflation, it needs to find new growth. This summer, that growth came from cuts and price increases. That's hardly sustainable, though. It's a short-term solution to hedge against a longer-term problem.

The big problem is Xbox's lack of new user acquisition. Xbox Game Pass, Xbox Cloud Gaming, and devices like the Xbox Ally haven't really helped. Most Xbox Cloud Gaming and Xbox handheld gamers are already Xbox Series X|S users. The trick is finding those elusive new users, which Microsoft describes as "NTX" internally (new to Xbox).

The crux of it will make for uncomfortable reading for Microsoft higher-ups: Xbox needs to become social media adjacent. It needs to be less sanitized. It needs to lean into that digital ooze I mentioned, and, perhaps even a little dangerous if it wants to succeed in an era where cultural capital is more important than pixel density.

I don't think Microsoft has the stomach for it ... but this is Asha Sharma's wheelhouse. It's probably no accident that she was specifically chosen for this job. It's probably no accident that she just bought Minecraft, Xbox's closest Roblox allegory, in-house. It's probably no accident that she hired Matthew Ball, who wrote the book on social media-adjacent games like Roblox as CSO.

It might take years to see the fruits of her ideas in this area ... and in the short term, she's going to focus on strengthening the core of what Xbox is today. But I believe she's also planting seeds for a social media revolution at Xbox — bringing Microsoft into an industry that it has long been too afraid to even touch.

What's your take? Let me hear it in the comments, down below.

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It's hard to find AI optimists these days.

AI-adjacent stocks have taken a battering in recent months, with Oracle and Microsoft particularly hard hit. Microsoft's stock is down over 20% from last summer's highs, as investors increasingly worry that the firm has over-extended and misjudged the opportunities therein.

Wider questions remain about the future viability of the tech. Cheaper Chinese models are pressuring the big U.S. hyper-scalers to find new efficiencies and strategies, as firms like OpenAI, SpaceX, Palantir, and Anthropic struggle to justify their more optimistic valuations. Some of the more dire warnings suggest the rife circular investments and financing could implode, threatening not only the associated companies, but potentially the entire global economy.

Recently, I caught up with Ed Zitron, head of EZPR and the Better Offline Podcast, who has become a prominent journalistic voice in AI analysis. Zitron's industry-leading tech newsletter Where's Your Ed At has become a primary source for those navigating the complex (and shady?) financial deals these companies are weaving, cutting through the industry hype with an oft-times scathing dose of reality.

I asked Zitron specifically about Microsoft's bets in this space, as the hype train objectively begins to lose steam.

Microsoft occupies an odd space in the "AI race," if you can still call it that at this point. Why do you think Wall Street and the stock market are rewarding Google but punishing Microsoft this year?

"It’s because Microsoft is uniquely awful at having to prove its worth outside of financials, and is run by some of the most decrepit, disconnected, and directionless leadership I’ve seen in any company I’ve ever monitored.

Whenever this company has to beguile investors, it can usually just throw up big money numbers and raise the price on Microsoft Office. This time it made the mistake of actually spending cash — and man, did AI save its ass from humiliation by distracting from its Activision-Blizzard acquisition! — on something, and doing so in the loudest way possible, because saying “AI” and spending lots of money on AI was all it took to make people buy your stock.

Sadly, $200 billion or more in capex in, Satya Nadella doesn’t really have a compelling answer as to where this money is going. He mentioned on their last earnings that they’d hit a $37 billion run rate for AI - around $3 billion a month in revenue, with the vast majority of that being OpenAI’s compute spend — and it didn’t get anybody hot and heavy, so the stock has kept tanking."

"This is also because Azure has been a much bigger business than Google Cloud.

Sundar Pichai is also better at the financial tricks than Satya Nadella, and worked out a way to make circular financing more conspicuous, selling Anthropic its own chips and then getting those chips put in Google data centers so that it can get the revenue from Anthropic, who it funds, buying compute. That huge bump in remaining performance obligations was, to be clear, mostly from circular financing.

I have no idea why Satya didn’t do this with OpenAI’s spend, and I have to wonder if he doesn’t start being really blunt about how much it’s boosting Azure revenue, even though that’ll probably work to his detriment.

Anyway, Google Cloud is a younger and smaller business and thus much easier to show explosive growth in. Satya is also not very good at marketing."

Do you think Microsoft will realistically see any long-term return on investment from its data center build out? Have they completely misjudged the potential?

"So, this depends on your definition of “ROI.” I think that, long-term, this will be seen as a disastrous, horrifying misallocation of capital, the kind of thing that will potentially get Satya Nadella fired.

In the short-term, Nadella got “ROI” out of AI in that it kept Microsoft interesting, and OpenAI’s compute spend buoyed Azure’s revenues without them ever having to disclose AI’s actual contribution. It was a shiny object to show investors, which gave them a vague sense of growth.

This was always a gamble, and because Microsoft started the era, it will inevitably be harmed the most by it.

No, I do not see any ROI at scale. Microsoft has spent over $200 billion on AI capex and will probably spend anywhere from $300 to $400 billion if it continues its pace past this year. It will need to make more than $500 billion in brand, spanking new revenue, in a very conspicuous way, to make any of this feel worthwhile."

"The problem they face is that the longer this goes on, the less incremental it can be. Showing modest growth in Intelligent Cloud and Business & Productivity isn’t going to make this problem go away.

The other is that the clock starts the second they stop spending on capex, and that includes a cut of anything more than 30%. Maybe they try and spread it out, but at some point they’re gonna have to stop, because this is a ludicrous expense.

But once they do, the street will start asking them to prove that they didn’t just nuke hundreds of billions of dollars and take on a bunch of debt for no reason.

I will say this: Amy Hood is very good at her job, and likely the only reason Satya Nadella hasn’t blown up the entire company."

Microsoft's early investment in OpenAI was initially hailed. In your research, how has that partnership panned out? Reporting suggests it hasn't gone well …

"At first, OpenAI must have seemed like the best thing that happened to Microsoft since it won that antitrust trial because the judge talked to the media. It was the single-most buzzy company in the world, and it had to spend money on Azure.

Satya Nadella could say that he had backed the next big tech titan, all while capturing the entirety of its value and cloud spend. The original deal - owning all the IP, making Azure their only cloud provider, all that stuff was a masterstroke.

Except it’s very obvious that something went sour there in 2024 or early 2025, likely when OpenAI demanded Microsoft build more compute than it wanted to. It must have also become clear that owning all of OpenAI’s IP and models and being able to power their services with it wasn’t actually helping Microsoft enough to justify the capex, so they got desperate and bought Mustafa Suleyman’s crappy little company so he’d bring that DeepMind magic to Microsoft."

"Also, Sam Altman very clearly started making demands that were effectively “change the agreement to our benefit for no apparent reason,” and Microsoft embarrassed themselves making any concessions for him. I think that Satya had assumed he had full control of Altman, and when that wasn’t apparent, I think it weakened both his and Microsoft’s position.

And, if I’m honest, Microsoft has embarrassed itself with AI - substandard models, lots of noise but not a lot of actual stuff, running GitHub Copilot at a massive loss for several years, then turning on token-based billing and creating a bunch of bad blood for no measurable gain?

The partnership was great when Satya had control, and the moment he let Altman buy compute from other companies was the moment he lost it, even though it was absolutely the right thing to do."

Windows users have backlashed pretty hard against some of Microsoft's AI products, including things like random Copilot buttons and Windows Recall. Do you see Microsoft finding any realistically good and viable uses for LLMs?

"Nope! I don’t remember the last time that Microsoft made anything that was both new and good, and every “idea” that Microsoft has is literally somebody else’s! Copilot Cowork is Claude Cowork, GitHub CLI is Claude Code, Scout is Codex or some other agentic crap; it’s all the same thing in the glossy Microsoft wrapper that used to mean “good but expensive” but now means “weird and sterile.”

This is not a product company, and the only thing they seem to be able to do with talent is lay it off. Nobody wants anything they’re selling other than for the products they like to work like they used to. If I surveyed 100 people about what they’d change about Microsoft, I bet at least 30% of them would say “remove Copilot.”

For that to change would require Microsoft to make a completely different product."

What do you think the AI landscape will look like in 5 years, if you had to predict?

"These are all guesses, and I can’t append them to any time period. I’m pulling them out of thin air — I can’t see the future! Nobody can! These are things that could happen far more than they are for sure events.

1. LLMs are gone from the cloud other than for obscure GCP/Azure/AWS instances with AI GPUs for people doing very specific things, all of which cost way too much to do regularly.

Whatever LLMs survive are a boring on-device situation you run on a $100k workstation, and that’s not very common because they’re pretty expensive. That being said, this might also be what happens to the large amounts of GPUs that are left for dead after the bubble pops.

2. Eventually, the big labs have to start doing aggressive cost cuts, which up usage but up costs, or cost increases, which destroys usage. Either way, growth is slowing because of token-minimizing, and it’ll accelerate and eventually break the companies."

"OpenAI dies or gets absorbed into Microsoft, who jacks up the prices and unwinds the business. The same happens to Anthropic, which likely becomes a much smaller company that’s effectively a subsidiary of Google and Amazon.

3. Microsoft does a $5bn-$10bn write-down of GPUs and Nadella is booted in favor of Amy Hood. Maybe more!

4. The software industry enters a prolonged depression within the next few years because growth starts to stumble in one of the major hyperscalers. Remember: Anthropic and OpenAI are currently boosting the revenues of Microsoft, Google and Amazon, to a level that I really should look into!

5. NVIDIA’s revenues eventually return to the 2023 era, single-digit billions of dollars annually. I also expect some sort of write-down on their side too."

A huge thanks to Ed Zitron — now it's your turn

Thanks a ton to Ed Zitron for joining us on this piece. Be sure to check out Ed Zitron's podcast and newsletters here; both are full of incredible research and insights into the AI biz more recently, but also tech in general.

Often when I'm writing about AI, I feel like the big players are gaslighting me into believing that the tech is good enough to solve all of humanity's problems, if we'll just hang on and accept a little bit more (a lot more) compute. While it seems AI does have a role to play in parsing large quantities of data and tracking anomalies humans might miss, the "hyperscale" opportunities increasingly seem far-fetched and vague as we head through the current cycle.

Where it all ends up remains anyone's best guess. Perhaps some kind of incredible breakthrough will give AI the nuance and accuracy it needs to actually be a viable general-purpose assistant — rather than an expensive mimicry and content theft machine.

Perhaps its pairing with robotics will enable real opportunities that have so far eluded the big corps. Or perhaps the simple truth is: there's no real room for optimism here. Perhaps we've all been conned by something that seems suspiciously capable on the surface, until you actually put it to any form of real work.

What do you think? Hit the comments, let's talk.

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One of the most contentious issues around Xbox in recent years is the management of the Halo franchise.

Halo was to Xbox what Mario is to Nintendo. For years, it was Halo that led the tip of the spear for Xbox's surge in the gaming industry. The innovation with multiplayer and console-oriented shooters in general helped Xbox drive a wedge into a very established gaming industry. Halo 3's launch was legendary, and Halo game launches in general used to be "events." Those times are long passed.

Halo hasn't recaptured the magic of yesteryear. Halo Infinite was well received, but its post-launch mismanagement put a dampener on proceedings. The Halo TV show was also an unmitigated disaster, representing the raw squandered potential in this storied franchise.

In 2026, we're now getting Halo 1 "again," in the form of Campaign Evolved. It's already mired with controversy from some Halo purists for liberties taken with the art, and on the Xbox side for its launch on PlayStation. Given the backdrop of Xbox's so-called "reset" layoffs, Halo has something of a microscope on it right now. Including its leaders, for less-than-positive reasons.

YouTuber Rebs Gaming has been reporting on Halo for a while. As a Halo fan, Rebs echoed community sentiment about the franchise's general decline, but has put a focus on the studio's leadership. In his latest video, Rebs shares allegations that studio lead Pierre Hintze has antagonized staff, while also being reportedly referred to HR "multiple times" for his apparent behavior — although from documents I've received, at least one of the complaints were not upheld by Microsoft upon investigation.

In Rebs' video, he quotes one source, "I was verbally blasted by Pierre. It's emotional and shocking, and to this day, I cannot believe Microsoft HR and Microsoft Legal did not give me the time of day. Pierre literally told me to 'get the fuck out of the studio.' It traumatized me."

Rebs' videos are heavily editorialized and interspersed with opinions on the fate of Halo overall, but I wanted to see if the actual claims against Hintze are credible. Rebs reported that Halo Studios was working on a multiplayer title known as Project Ekur, which was cancelled. I've verified that as 100% true. However, while I couldn't verify everything Hintze is accused of saying in Rebs' video, unfortunately, comments I've received lend weight to some of these allegations. Sources infer that harbors a capacity for creating friction between his team and Xbox more broadly, and it's suggested that he is a controversial figure internally.

Former Halo Art Director Glenn Israel has gone on the record previously alleging as though he was retaliated against by Pierre Hintze for raising concerns that Halo Studios had arbitrarily blacklisted potential candidates over personal issues.

"Hiring interference is an explicit Microsoft policy violation (Standards of Business Conduct, Global Hiring Principles, Anti-Corruption/Conflicts-of-Interest policies)," Israel recently wrote on LinkedIn. "Blacklisting is a civil and criminal offense in the state of Washington (RCW 49.44.010)."

In addition, I spoke to over half a dozen staffers past and present who had experience working with Hintze. Even though I couldn't verify some of the information in Rebs' own video, I was passed other criticisms (and also praise) of Hintze.

Some suggested that some present-day Xbox producers and managers refuse to engage with Hintze without supervision, owing to feeling antagonized and undermined. I was told multiple anecdotes from very separate sources about Hintze exhibiting vocal disrespect for other Xbox studios, teams, and projects, which didn't exactly paint him in a positive light.

I saw emails sent to Microsoft HR that alleged "bullying" on the part of Pierre Hintze, criticizing his treatment of staff. However, others did offer mitigating comments. One defended Hintze, emphasizing his passion and dedication to the product. They suggest that he's not necessarily ill-intentioned, but sports a "complete lack" of tactfulness and people skills, in their opinion.

A lack of "people skills" is potentially problematic as a studio lead, particularly one with such a high profile as Halo. It was suggested to me that Hintze might simply be too stretched as a studio head, lacking the correct attitude to steer a large team in a single direction. The Halo Studio is under tremendous pressure, and the chaos around Xbox's current "reset" is likely making things even more difficult.

What's next for Halo?

Xbox CEO Asha Sharma described a plan to focus on the firm's biggest franchises moving forward, naming specifically DOOM, Fallout, and Halo, among others.

Xbox's cuts have been broad and aggressive. Id Software of DOOM fame lost anywhere up to half of the studio, with ZeniMax seemingly bearing the brunt of this initial wave of cuts. Halo Studios seems to have avoided being targeted more broadly, given Halo's importance to Asha Sharma's plans. But it remains to be seen whether or not Xbox leadership will decide if yet another reorganization of Halo's management is required.

Halo Campaign Evolved launches on July 28, 2026, for Xbox Series X|S, PC, and PlayStation 5.

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Microsoft did say it wanted to make more console exclusives, but perhaps this isn't what Xbox fans had in mind.

One of the best features on Xbox One and Xbox Series X|S is the backwards compatibility program. It features hundreds of games from Xbox 360 and OG Xbox consoles, giving you the opportunity to dip into some nostalgia even on modern systems. Some games on there aren't available at all on any other platform, too.

Some of the older Call of Duty titles were simply never ported to modern PlayStation systems, meaning the only ways to access them on modern platforms is via either PC or a modern Xbox.

To plug the gap, Microsoft and Activision just did some very basic ports of Call of Duty: Black Ops 1 and 2 to PlayStation 5. And PlayStation fans are loving it. The games are beating GTA 6 on the PlayStation charts, which shows how much nostalgia there still is for some of these classic games. Xbox fans, however, are NOT happy — and it's not because they're gatekeeping.

Microsoft's purchase of Activision Blizzard gave it full control of the Call of Duty franchise. Classic Call of Duty games were already broadly available on Xbox backwards compatibility, complete with online matchmaking and the like. However, given the lack of security updates for Xbox 360 consoles, system hackers are prevalent, making some of them virtually unplayable.

Call of Duty: Black Ops 1 and 2 are as basic as ports can be. Activision has practically done nothing to enhance them besides a res bump, and it seems honestly intentional. I imagine the reason they haven't is because it would rub even more salt in the Xbox wound — it's almost like they're designed to mimic the Xbox 360 back compat versions as much as possible. Iron Galaxy also did the (very solid) ports for Tony Hawk's Pro Skater, so it's not a matter of skill here.

Even if they do offer some visual enhancements, the real issue is the prevalence of hackers on the Xbox back compat versions. The Xbox 360 security layers have been torn down over the years, allowing for cheaters to ruin the experience. Since the Black Ops 1 and 2 ports on PlayStation 5 are siloed away from older systems, they're far less susceptible.

As a result, what you have here is a de-facto PlayStation console exclusive, published by Xbox.

Usually I would gloss over a basic port of a Xbox 360 game, but as you can see from how hard the game is charting, these are very beloved titles. While players wait for September's sprint of heavy hitters, indulging in some innocent nostalgia would've been a nice bet. Clearly the PlayStation charts agree.

It's a pure oddity that Microsoft decided to leave Xbox fans out here, and the reactions on social media have been what you might expect. As a gesture, it seems like Microsoft has decided to make the Black Ops' DLC free on the Xbox Store, but the hacker-ridden base game is still a frankly absurd $40.

I've reached out to Microsoft and Activision to get comments on why they decided to leave the Xbox version of Black Ops 1+2 broken in light of this trending PS5 port. But I suspect they had no idea it would do so extremely well on PlayStation. Had they not trended, it probably wouldn't have shined such a bright light on the state of the Xbox backwards compatible versions either — although I've been receiving messages about it for quite a while now.

I suspect Microsoft and Xbox won't do much to resolve the situation. They've opened a can of worms here. The source code for the original games and their server infrastructure is likely on ice. Microsoft could ship new Call of Duty: Black Ops 1+2 ports that cut off the previous versions. The downside is, users on Xbox 360 (and yes, there are still tens of thousands of players on Xbox 360) and back compat would be left adrift.

It all just screams of lack of organization and forethought, but things are pretty chaotic at Xbox right now ...

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Xbox's cuts over the past week have been brutal; let's not mince words here.

Four studios divested with a possible fifth in progress, over a thousand jobs removed already, with a further 2000 planned. The atmosphere within Xbox right now is dire — a total 180 following the wave of optimism from new CEO Asha Sharma's appointment in spring.

As a result, there are tons of stories coming out about what the fate of Xbox's remaining studios might be. A lot of the discourse has fallen on id Software right now, the beloved maker of DOOM. The studio is an industry staple, and arguably one of the most important and influential brands in the modern gaming canon.

Cuts at id Software have been heavy and painful. Some have claimed the studio's lauded id Tech engine is effectively on ice, and that id is no longer large enough to produce its own games.

What's the truth here? I've been investigating Microsoft's plans for id. Despite the callousness of Microsoft's bean counters, I'm confident the studio will endure.

Microsoft has no plans to shelve id Tech

DOOM and other id Software games have long been powered by the id Tech engine. The engine was designed originally for Quake back in the 90s, and has since powered a huge variety of titles, including open-world games like RAGE, horror games like The Evil Within, Wolfenstein shooters, and, of course, the modern DOOM games. More recently, Machine Games' Indiana Jones and DOOM: The Dark Ages were built on the latest versions of id Tech.

It has a very different feel to Unreal Engine, particularly for first-person games. It's been lauded for its optimization on lower-end hardware stacks, as well as its general versatility.

The cuts to id Software have hit the teams that develop id Tech hard, with decades of expertise wiped out over night. But rumors that there's now virtually nobody working on the engine are false. Sources tell me that there remains a solid stack of expertise for id Tech across id Software itself, and Machine Games. I'm told Microsoft also has no plans to shift either studio forcibly to Unreal Engine, which seems to have become the default for Microsoft and many other core game makers.

Microsoft provided us this statement on the topic: "There are dozens of people working on id Tech across multiple locations. Reports that there’s only one person left in Texas are inaccurate."

In my view, Microsoft would have to be miserably short-sighted to deprecate id Tech. Handing even more power to Unreal Engine opens them up to monopolistic price increases down the line, which would be fiscally irresponsible. Xbox CEO Asha Sharma herself said in her memo to staff that she wants Microsoft to rely less on vendors for things like this. As such, I would argue that Microsoft should invest more in id Tech, not less.

But hey, quarterly thinking is Microsoft's M.O. these days. And it is true that generational talent and knowledge has been carelessly cast aside.

id Software's headcount is now similar to what it was for DOOM (2016)

The other rumor flying around is that id Software has shrunk to a headcount that is untenable for future self-made products, relegating them to "support studio" status. This too, is false.

While the cuts have been alarmingly callous, my understanding is that the remaining id Software core team is roughly the same as it was when DOOM (2016) shipped. DOOM (2016) is arguably the studio's best-ever game in my view, despite the comparatively smaller headcount that produced it. That's not too suggest in any capacity that we should expect the same quality bar without proof ... Microsoft removed mountains of incredible talent from the pool.

Still, I'm not sure exactly what id Software could be making next. There have been reports that id Software had a variety of pitches in the pipeline, including a Perfect Dark reboot and a Western-styled shooter dubbed Ironwood. It's unclear if any of these will be greenlit.

id Software just shipped DOOM: The Dark Ages Revelations, a sizeable story expansion for last year's DOOM prequel. What the studio builds next remains to be seen, but Xbox CEO Asha Sharma specifically called out DOOM and Quake as franchises to invest in.

Microsoft wants to grow its most staple and recognizable IP, which at least in the near term, likely excludes "new" franchise ideas. I'd still like to see what a modern Hexen would look like ... perhaps we'll learn more at Quakecon, which is still going ahead.

It's still been a needlessly brutal exercise

While rumors of id Software's demise have been greatly exaggerated, the layoffs have still been callous and brutal. Staffers with decades of expertise and tenure were let go, despite the success of the modern DOOM trilogy.

Microsoft's gaming aspirations have been heavily reduced over the past week, in what CEO Asha Sharma has been describing as a "reset." This has led to sizeable reductions in teams working on a variety of projects, from The Elder Scrolls to Xbox's social media delivery and platform features. Other studios, like Blizzard, seem to have emerged largely unscathed so far. And Xbox's hardware team building Helix has also been left intact.

Xbox has worked hard to save studios like Undead Labs from outright closure. But, it hasn't prevented Microsoft from expunging hundreds of jobs in other areas, inside Xbox and beyond. Microsoft's huge bets on artificial intelligence haven't really delivered meaningful returns, and the vast capital expenditure on data center buildouts is spooking investors.

At Xbox, the layoffs reflect a challenging time in traditional gaming. Core gaming has seen a contraction owing to increased costs and lack of investment in younger cohorts, which dropped consoles in favor of Roblox on mobile devices, alongside non-gaming activities. Microsoft's lack of investment in Xbox's platform and social features have prevented it from finding new users out of the Gen-X and Gen-Y cohorts, many of whom are starting to age out.

Where Xbox goes from here wholly remains to be seen, but one thing is for sure: DOOM is eternal, and it will outlive Microsoft's bad decision-making.

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Microsoft's share price has slid 22% in the past year, as investors increasingly cast doubt on the firm's long-term AI strategy.

Artificial intelligence has been billed as the next coming by Big Tech, with everyone from Amazon to Google trying to figure out how to leverage the expensive technology to generate profits. The problem is, nobody is even close to having an answer.

Generative AI is incredibly costly to run, and the return on investment is unclear at best. Many companies are starting to discover that, in fact, it's cheaper and more effective to simply use human labor. Companies that previously laid off engineers in favor of AI models later found themselves crawling back to those fired, and others have put large restrictions on token expenditure as returns remain elusive.

I saw a clip on CNBC from Ed Zitron, creator of the Where's Your Ed At newsletter and host of the Better Offline podcast recently. It summarized Microsoft's AI conundrum in pro wrestling terminology — which appealed to my simple brain. His full analysis is anything but simplistic, though. It speaks to the hard reality companies like Microsoft are facing: Is any of this actually worth it?

Zitron describes the challenges of companies like OpenAI and Anthropic joining SpaceX in going public, describing how the company's financial realities betray the almost demented hype around them.

"They'd be the first to be this bad, other than WeWork, and this is so much worse than that. OpenAI burned $20.9 billion dollars in 2025. The problem with these companies is ... their margins are getting worse. Their costs increase linearly with their revenues. There's no proof they can improve their margins. No amount of specialist silicon will bring these costs down.

"We're at a point where OpenAI is pushing their IPO to 2027 because they couldn't get a trillion-dollar valuation. People are wising up to the problem of generative AI: there's not really a business there."

Zitron posits that none of the hyperscalers and companies like OpenAI and Anthropic "encourage waste," while potentially stealing ideas generated by companies using their models, citing Claude Design and Figma. Indeed, the only public company that seems to be flying on its AI hype right now is Google. I would argue that's less to do with innovating, and more because they've found a way to steal revenue from human creators via Gemini's Google Search summary box — instantaneously creating infinite, dynamic (albeit hallucinating) ad-scaling opportunities.

This wholesale content theft is not as readily available to OpenAI, Anthropic, or Microsoft. Google Search remains the dominant tool for browsing the web, and thanks to Chrome and Android, Google owns the entire stack here.

Microsoft very much does not own the entire stack. It barely owns a stack at all here.

Microsoft's partnership with OpenAI is on the verge of collapse, pending contractual obligations that will expire over the next few years. It's already ditching OpenAI's pricey models in favor of supposedly more-efficient MAI home-grown models in some products. Microsoft Copilot is already barely used, despite being baked into Windows. It languishes at lower than 10% of the market, according to estimates, far behind the likes of Claude, Gemini, and ChatGPT.

CEO Satya Nadella's decision to give up on Windows Phone and internal Android projects has precluded Microsoft from any form of mobile play here. Mobile is where all new consumer tech will thrive, whether or not it's AI or something else. The historical open nature of Windows prevents it from reaching consumers with any of its products. Nobody uses Bing, Edge, or Copilot, and it's a result of Microsoft's wholesale lack of foresight.

Microsoft bet that it could provide the underlying infrastructure instead, and has spent monstrous amounts of CapEx on data centers in the past few years. But Zitron posited in a large report from May that it might be exaggerating, or perhaps even outright lying, about its data center expansion plans. Indeed, there's little evidence that Microsoft has actually expanded its capacity since 2024. Zitron tracked a variety of Microsoft-announced data center projects and found them in various states of incompletion.

Is this a signal that there's no real demand? Is Microsoft intentionally stalling and dragging out construction because it knows there's no actual ROI incoming from these projects?

AI-adjacent stocks, including SpaceX, Oracle, and Microsoft, have all been in near free-fall decline recently, as investors seem to bet that there's gross over-extension going on. Meta is also reportedly spinning up a cloud company to try and offload excess compute it had previously invested in AI specifically, despite not having any actual demand.

"The only reason Big Tech is investing in this is that they've run out of hypergrowth ideas," Zitron said, on the general AI industry. "They don't have a next iPhone, they don't have a new Google Search. They've put over a trillion, with trillions more to come, into a kind of dead-end industry. When that ends, they'll have to admit that they don't have anything else."

"In the future, I see [AI] as a boring hardware-based business, kind of the Oracle licensing hardware model. I think this is a $10 to $30 billion TAM [total addressable market] industry, pretending to be a $1 trillion industry."

"Everyone is just kind of pretending. It's the kayfabe of a tech industry that really has run out of ideas."

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A new report suggested that Xbox plans to double down on exclusive games, as Microsoft explores paths to grow its ecosystem.

This week, Microsoft begun processes to eliminate 3,200 roles from its Xbox gaming division, with hundreds already laid off or leaving in divested studios. In a report in Bloomberg outlying what went wrong at Xbox, we potentially caught a glimpse at how Microsoft's thoughts are evolving around its gaming ecosystem.

At the Xbox Showcase, CEO Asha Sharma outlined plans to make Gears of War: E-Day and Clockwork Revolution fully exclusive to Xbox consoles. Bloomberg suggests Microsoft is looking to add even more exclusive games to its lineup potentially, which echoes comments execs made to me at Summer Game Fest in LA last June.

Much like Xbox's "it's only four games" statement about going multiplatform previously, the "it's only two games" mantra applies here in reverse. Microsoft is looking at making even tentpole single player games, historically multiplatform, exclusive to Xbox hardware (at least on console.) Could this mean we eventually see the next mainline Fallout and Elder Scrolls go exclusive to console on Xbox?

Reaching the biggest possible audiences has been the best margin play Xbox has had in recent years. Microsoft was previously driving Xbox to chase a 30% profit margin, and an easy way to do that is sell software wherever you can. However, Asha Sharma is not operating under that mandate. Instead, Sharma is operating under an ecosystem growth mandate.

Sharma has spoken at length about how her initial focus will be on Xbox's core: the console gamer. Console gamers in the Xbox ecosystem represent 4 times higher lifetime spending than other types of users across Microsoft's vast gaming ecosystem. On PC, they compete with Steam for margins. On mobile, they compete with well-established and dominant Eastern titles, while handing away millions to Apple and Google for the privilege.

Despite Xbox's retreat from PlayStation in the recent term, there remains tens of millions of active users in the Xbox ecosystem. These users are disproportionately passionate and spendy. Indeed, I would posit that anyone left in the Xbox ecosystem after all the disappointments represent the least "casually-invested" consumers in all of gaming potentially. Sharma wants to grow that base.

It's more true than ever that Xbox represents discretionary spending, and console gaming in general. Next-gen (and even current-gen) consoles are going to be expensive, owing to the memory availability crisis, tariffs, and the rest of it.

Arguably, creating desire through exclusive content is more crucial than ever to maintain an ecosystem in this universe.

One way I've heard Microsoft is exploring achieving this is direct integrations between Xbox and Minecraft. Xbox CEO Asha Sharma restructured Minecraft to answer directly to her for the first time. Integrating Minecraft's features at a platform level into Xbox consoles will be one avenue of exploration her team will look into here. What that looks like remains to be seen. I don't think Microsoft will do anything to degrade the Minecraft experience on other platforms (especially PC and mobile), but there might be exclusive (albeit basic, but fun) integrations for Minecraft on Xbox consoles. I can see Microsoft leveraging Minecraft to sell Xbox Helix as well in some ways, with more aggressive co-marketing activations and bundles.

Longer term, Microsoft may explore doing this with Activision-Blizzard properties too, but there are currently regulatory restrictions preventing Xbox from leveraging things like Call of Duty in the same way.

PlayStation recently landed a massive (multi-million dollar) marketing deal for Grand Theft Auto 6. The marketing deal is so vast, that Rockstar can't even mention the fact there's an Xbox version. PlayStation rebranded its apps to match Grand Theft Auto branding, and you can expect billboards, ads, and other campaigns to follow — excluding Xbox from the conversation.

Under previous leadership, Xbox was strangely reluctant, even seemingly embarrassed, to associate some of its acquisitions with the Xbox ecosystem. Games like DOOM, Fallout, and indeed Minecraft, barely had any co-marketing with Xbox console hardware. And it has been to the console ecosystem's detriment.

The new leadership is taking the opposite view, and it might have no choice. If consoles are to be more expensive than ever, there needs to be more reasons than ever to buy one. If I'm going to drop $1000 on a PS6 or Xbox Helix, why would I buy the box that gets less content?

Asha Sharma hopes by leveraging some of Xbox's biggest franchises in co-marketing, co-integrations, transmedia content, and exclusivity regimes, she might be able to convert more gamers into core Xbox users.

Phil Spencer was transparent in thinking this wouldn't be possible, suggesting in a previous interview that even if Starfield was a mega-banger, making it exclusive wouldn't move the needle for Xbox hardware. Sharma is betting that maybe a steady stream of said bangers might do the trick.

It will take years to find out if she's right — but will Microsoft corporate give her years to implement this strategy? That's arguably an even bigger question.

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