SEATTLE — In a significant shake-up at Microsoft, Xbox chief Phil Spencer announced his retirement after nearly four decades with the company, paving the way for new leadership in the gaming division. The move, revealed in an internal memo from Microsoft CEO Satya Nadella on Wednesday, also includes the departure of Xbox President Sarah Bond, signaling a transitional period for one of the tech giant's most prominent consumer-facing businesses.
Spencer, who has led Microsoft's gaming efforts since 2014, joined the company as an intern in June 1988 and rose through the ranks to become a key architect of the Xbox brand. His tenure oversaw major milestones, including the launch of the Xbox Series X and S consoles in 2020, the expansion of the Xbox Game Pass subscription service, and blockbuster acquisitions such as Mojang in 2014 for $2.5 billion, ZeniMax Media in 2021 for $7.5 billion, and Activision Blizzard in 2023 for $68.7 billion. These deals have positioned Microsoft as a dominant force in the global gaming industry, which generated over $184 billion in revenue worldwide last year according to industry estimates.
Nadella's memo to employees highlighted Spencer's contributions, stating, “Last year, Phil Spencer made the decision to retire from the company, and since then we’ve been talking about succession planning. I want to thank Phil for his extraordinary leadership and partnership. Over 38 years at Microsoft, including 12 years leading Gaming, Phil helped transform what we do and how we do it.” Spencer will stay on in an advisory capacity through the summer to ensure a smooth handover.
In his own memo to Xbox staff, Spencer reflected on the timing of his decision, noting it came in the fall of 2025 amid online speculation about his future. He clarified that Microsoft had denied retirement rumors in July, saying Spencer was “not retiring anytime soon.” Spencer wrote, “Last fall, I shared with Satya that I was thinking about stepping back and starting the next chapter of my life. From that moment, we aligned on approaching this transition with intention, ensuring stability, and strengthening the foundation we’ve built. Xbox has always been more than a business. It’s a vibrant community of players, creators, and teams who care deeply about what we build and how we build it. And it deserves a thoughtful, deliberate plan for the road ahead.”
The leadership changes extend beyond Spencer. Sarah Bond, who has served as Xbox president since 2024, is also leaving to “begin a new chapter,” according to Spencer's memo. Bond played a pivotal role in recent years, including shaping platform strategy, expanding Game Pass to over 34 million subscribers by mid-2024, advancing cloud gaming initiatives, and supporting hardware launches like the Xbox Series X. Spencer praised her, saying, “Sarah has been instrumental during a defining period for Xbox, shaping our platform strategy, expanding Game Pass and cloud gaming, supporting new hardware launches, and guiding some of the most significant moments in our history.” Microsoft has not disclosed Bond's next destination or the exact timing of her exit.
Stepping into the role of CEO for Microsoft Gaming is Asha Sharma, currently the president of Core AI product at Microsoft. Sharma rejoined the company in 2024 after stints at Meta, where she was vice president of product and engineering, and Instacart as chief operating officer. Her earlier tenure at Microsoft ended in 2013 when she left a marketing position. While not a gaming industry veteran like Spencer—who is known for his deep passion for video games—Sharma brings extensive experience in building scalable platforms and aligning business models for long-term growth.
Nadella expressed confidence in Sharma's appointment, noting, “I’m long on gaming and its role at the center of our consumer ambition,” and adding that she has “deep experience building and growing platforms, aligning business models to long-term value, and operating at global scale, which will be critical in leading our gaming business into its next era of growth.” In her internal memo, Sharma outlined three key priorities: delivering great games, recommitting to the Xbox brand, and innovating for the future of play. She emphasized, “We will recommit to our core Xbox fans and players, those who have invested with us for the past 25 years, and to the developers who build the expansive universes and experiences that are embraced by players across the world. We will celebrate our roots with a renewed commitment to Xbox starting with console which has shaped who we are. It connects us to the players and fans who invest in Xbox, and to the developers who build ambitious experiences for it.”
Last year, Phil Spencer made the decision to retire from the company, and since then we’ve been talking about succession planning. I want to thank Phil for his extraordinary leadership and partnership.
Sharma's background in AI could prove particularly relevant as Microsoft integrates artificial intelligence into gaming. The company has already experimented with AI tools for game development and player experiences, such as generative AI in titles like Minecraft and enhancements to cloud services. Her role in Core AI, which focuses on Microsoft's broader AI platform, positions her to bridge gaming with emerging technologies like Copilot and Azure AI services.
Alongside these changes, Microsoft is promoting Matt Booty to executive vice president and chief content officer. Booty, who was elevated to president of game content and studios in 2023, will oversee creative direction for Microsoft's studios, including powerhouses like Bethesda, Activision Blizzard, and Turn 10 Studios. In a memo to gaming employees, Booty expressed appreciation for Spencer's influence, saying, “I read Phil’s note with much gratitude. He has been a steady champion for game creators and our studio teams, and I’ve learned so much from his leadership over the years. All our games have benefited from his foundational support.”
Spencer's early career at Microsoft provides context for his long-standing impact. Starting with projects like the Encarta encyclopedia, Microsoft Money financial software, and Microsoft Works productivity suite in the 1990s, he transitioned to gaming in 2001 when the original Xbox launched. By 2008, he was general manager of Microsoft Studios, and in 2014, he took the helm of the Xbox division amid challenges like the underwhelming reception to the Xbox One console. Under his leadership, Microsoft shifted focus toward services like Game Pass, which now offers access to over 400 games for a monthly fee, and multi-platform strategies that include releasing former exclusives on rival systems like PlayStation and Nintendo Switch.
The acquisitions during Spencer's era have not been without controversy. The Activision Blizzard deal, in particular, faced intense regulatory scrutiny from bodies like the U.S. Federal Trade Commission and the UK's Competition and Markets Authority, delaying its completion until October 2023. Critics argued it could stifle competition in the gaming market, but Microsoft maintained it would benefit consumers through broader access to titles like Call of Duty and Overwatch. Spencer often positioned these moves as efforts to build an inclusive ecosystem for developers and players.
Reflecting on his journey, Spencer wrote in his memo, “When I walked through Microsoft’s doors as an intern in June of 1988, I could never have imagined the products I’d help build, the players and customers we’d serve, or the extraordinary teams I’d be lucky enough to join. It’s been an epic ride and truly the privilege of a lifetime.” His departure comes at a time when the gaming industry faces headwinds, including layoffs at major studios—Microsoft itself cut 1,900 jobs in its gaming division in January 2024—and shifting consumer habits toward mobile and cloud-based play.
Analysts view the leadership transition as a bet on diversification. With gaming now intertwined with Microsoft's cloud and AI ambitions, Sharma's expertise could accelerate innovations like AI-driven personalization in games or enhanced cross-device play. However, some industry observers question whether her lack of direct gaming experience might challenge her in navigating the passionate fanbase and creative studios that define Xbox.
Microsoft has not specified a start date for Sharma's new role, but the advisory period for Spencer suggests continuity in the near term. The company plans to maintain its commitment to annual hardware refreshes and Game Pass growth, with upcoming titles like the next Call of Duty and Fable expected to drive engagement. As Xbox enters this new chapter, the focus remains on balancing its console heritage with broader entertainment ambitions, including potential expansions into streaming and virtual reality.
The shake-up underscores Microsoft's evolving priorities under Nadella, who has steered the company toward cloud computing and AI since becoming CEO in 2014. Gaming, once a smaller part of the portfolio, now represents a critical pillar, contributing significantly to Microsoft's $211 billion in annual revenue. For fans and developers, the coming months will reveal how these changes shape the next generation of interactive entertainment.