Seattle, WA – In a stunning leadership shakeup, Microsoft Gaming CEO Phil Spencer announced his retirement on Friday, February 20, 2026, after 38 years with the company. The move comes as Microsoft navigates a challenging period for its Xbox business, marked by a nearly 10% revenue decline in the December quarter – a steeper drop than anticipated.
Spencer, who revitalized the Xbox brand after the difficulties surrounding the Xbox One launch, will be succeeded by Asha Sharma, currently President of Microsoft’s CoreAI division. Sharma joined Microsoft in 2024, bringing experience from Meta and Instacart. This transition, prepared since last fall in collaboration with Microsoft CEO Satya Nadella, signals a new chapter for the gaming giant.
Adding to the surprise, Xbox President Sarah Bond is also departing the company. Matt Booty, currently Head of Xbox Game Studios, will step into the newly created role of Executive Vice President and Chief Content Officer, reporting directly to Sharma. This restructuring aims to streamline content strategy and leverage the expansive portfolio of studios under the Microsoft Gaming umbrella, including Xbox, Bethesda, Activision Blizzard, and King.
Sharma outlined three key priorities for the future of Xbox in an internal message: delivering “great games” with increased investment in major franchises and creative risk-taking; a “return of Xbox” focused on strengthening the console experience although expanding across PC, mobile, and cloud platforms; and shaping the “future of gaming” with a focus on responsible AI integration – avoiding “soulless content,” as she put it. The appointment of an AI executive to lead the gaming division underscores the growing importance of artificial intelligence in the future of interactive entertainment.
- First, “great games,” with reinforced investments in major franchises and new creative risks.
- Next, the “return of Xbox” through a renewed commitment to consoles while continuing the multiplatform strategy (PC, mobile, cloud).
- Finally, the “future of gaming,” where AI will have its place without generating “soulless content.”
The leadership changes come after Microsoft’s $75 billion acquisition of Activision Blizzard in 2023, a move intended to bolster its position in the competitive gaming market. The company also recently announced an unspecified impairment charge in its gaming business in January. The coming years will reveal how Sharma’s vision will reshape Microsoft’s gaming strategy and address the challenges facing the Xbox ecosystem.
Source: Microsoft
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