Microsoft's gaming division is undergoing one of its biggest shakeups in recent years after announcing widespread layoffs and major organizational changes across Xbox.
The restructuring comes as new reports suggest that Xbox Game Pass, Microsoft's flagship gaming subscription service, has fallen well short of the ambitious growth targets the company set several years ago.
The Game Pass remains one of the largest gaming subscription platforms in the industry, but its reported subscriber growth has not matched Microsoft's long-term expectations.
Xbox Game Pass Reportedly Falls Short of Internal Goals
According to a report citing documents disclosed during Microsoft's acquisition of Activision Blizzard, the company projected that Game Pass would reach approximately 77 million subscribers by 2026. However, people familiar with the matter told The Wall Street Journal that the service currently has around 30 million subscribers, less than 40% of Microsoft's original target.
The reported shortfall comes despite Microsoft's multibillion-dollar investment in expanding the Xbox ecosystem through first-party game development, cloud gaming, and major studio acquisitions.
Although Microsoft has not recently updated Xbox hardware sales, its main competitor continues to post strong console numbers. Sony recently announced that PlayStation 5 sales have surpassed 93 million units, highlighting the competitive landscape facing Xbox.
Price Changes Slowed Subscriber Growth
According to ComicBook, Game Pass reportedly peaked at around 35 million subscribers before subscription growth reversed following a major price increase in 2025.
Microsoft increased the monthly price of Game Pass Ultimate from $19.99 to $29.99 before later lowering it to $22.99. The company also changed its content strategy by ending day-one availability of new Call of Duty releases on the service.
Xbox executives have acknowledged that the pricing changes led to millions of canceled subscriptions, reinforcing concerns that affordability remains a key factor in retaining subscribers.
Microsoft Invested Billions to Grow Game Pass
Game Pass has been central to Microsoft's gaming strategy for years. To strengthen the subscription library, the company acquired numerous studios, including Double Fine, Ninja Theory, and Compulsion Games, before completing its landmark $69 billion acquisition of Activision Blizzard.
However, a previous report stated that these studios were rumored to be affected by Xbox Studios' restructuring.
The expectation was that a larger portfolio of first-party games would drive long-term subscriber growth. However, recent reports suggest those investments have not produced the level of expansion Microsoft originally anticipated.
Xbox Begins Major Business Reset
The disappointing subscriber numbers arrive as Microsoft launches a significant restructuring of its gaming division.
Xbox CEO Asha Sharma recently described the current business as "not healthy," saying that investments in Game Pass, multiplatform publishing, and content expansion created value but "did not grow at the pace we expected."
Despite the setbacks, Microsoft has reiterated its commitment to Xbox and Game Pass. The company plans to streamline operations while continuing to invest in gaming services and major franchises.
