Microsoft Xbox Chief Phil Spencer Retires After 38 Years

Phil Spencer Exits Microsoft After Nearly Four Decades

Phil Spencer, the long-time head of Microsoft's gaming division, is retiring after 38 years at the company. His departure marks the end of an era for Xbox, which Spencer led through some of its most transformative — and turbulent — years.

Microsoft CEO Satya Nadella confirmed the news in a memo to employees on Friday, stating that Spencer had made the decision to retire last year and that succession planning had been underway since then.

Asha Sharma Named New Gaming CEO

Asha Sharma, who joined Microsoft in 2024 from Instacart where she served as Chief Operating Officer, will take over as CEO of Microsoft Gaming. Until now, she has been president of product in Microsoft's Core AI business.

Before Instacart, Sharma spent four years as a Vice President of product and engineering at Meta and two years in marketing at Microsoft earlier in her career. She brings deep technology and commerce experience to the gaming role.

Xbox Business Faces Mounting Challenges

Spencer's exit comes at a challenging time for Xbox. Revenue from video games at Microsoft declined about 10% in the December quarter from a year earlier — a steeper drop than the company had projected. This happened while Microsoft's total revenue grew nearly 17%.

The company's $75 billion acquisition of Activision Blizzard in 2023 was supposed to supercharge the gaming division. While it brought franchises like Call of Duty into the Xbox ecosystem, current-generation Xbox consoles have continued to trail behind Sony's PlayStation and Nintendo's Switch in sales. Microsoft has also shuttered multiple gaming studios.

Spencer's Legacy at Xbox

When Spencer took charge of Xbox in 2014, the division was in serious trouble. Sony was outselling Microsoft in consoles, and investors had floated the idea of spinning off consumer assets like Xbox. Analysts estimated the division could lose more than $1 billion for the year.

Spencer persuaded Nadella to keep Xbox and consolidate hardware, software, and game-development groups into one organization. Under his leadership, Microsoft's gaming business nearly tripled, driven in part by major acquisitions including Activision Blizzard and Minecraft developer Mojang.

Leadership Shake-Up Beyond Spencer

Sarah Bond, president and COO of the Xbox unit, will also leave Microsoft. Matt Booty, head of Microsoft's gaming studios, will stay on and report to Sharma as executive vice president and chief content officer.

Spencer's departure follows a wave of high-profile exits from Microsoft in recent years, including business development chief Chris Young and GitHub CEO Thomas Dohmke in 2025.

Sharma's Vision: No "Soulless AI Slop"

In a message to Microsoft's gaming employees, Sharma made a notable pledge about the role of AI in gaming: "As monetization and AI evolve and influence this future, we will not chase short-term efficiency or flood our ecosystem with soulless AI slop. Games are and always will be art, crafted by humans, and created with the most innovative technology provided by us."

She also committed to renewing Microsoft's focus on console gaming and recommitting to core Xbox fans who have invested in the platform for the past 25 years.

The Bottom Line

Microsoft is essentially hitting reset on its entire gaming leadership at a time when Xbox revenue is declining and the $75 billion Activision bet has yet to pay off. Whether Sharma — an AI executive with no gaming background — can revitalize Xbox remains to be seen. But her strong anti-AI-slop stance and commitment to core gamers suggests she understands what the Xbox community wants to hear. Now the question is whether Microsoft will follow through.