SEATTLE – After nearly four decades with Microsoft, Phil Spencer is stepping down as Chief Executive Officer of Microsoft Gaming, effective . The move, announced Friday, sees the reins of the tech giant’s gaming division handed to Asha Sharma, a rising executive recruited from Instacart in 2024 and currently president of Microsoft’s CoreAI product development.
The transition, while announced publicly on Friday, was reportedly communicated to staff last year, according to Microsoft CEO Satya Nadella. Spencer’s departure marks the end of an era for Xbox, having joined Microsoft as an intern in 1988 and becoming a central figure in the company’s gaming strategy since the launch of the original Xbox console in 2001.
Sharma’s appointment represents a significant shift in leadership for Microsoft Gaming. Her background in artificial intelligence, coupled with prior experience as Chief Operating Officer at Instacart and Vice President of Product Development at Meta, signals a potential refocusing of the division’s priorities. She will report directly to Nadella.
The leadership reshuffle extends beyond the CEO position. Matt Booty, currently head of Xbox Game Studios, has been promoted to Chief Content Officer, tasked with working closely with Sharma to shape the future of Microsoft’s gaming content. The departure of Xbox President Sarah Bond, long considered a potential successor to Spencer, adds another layer of complexity to the transition.
Spencer’s exit comes at a pivotal moment for Microsoft Gaming. The company completed its acquisition of Activision Blizzard in 2023, bringing blockbuster franchises like Call of Duty under its umbrella and expanding its cloud gaming offerings. However, recent financial results reveal challenges. Video gaming revenues experienced a 10% decline between December 2024 and December 2025, exceeding the company’s expectations, according to CNBC reporting.
Despite the downturn in gaming revenue, Microsoft as a whole posted a 17% revenue gain in the fourth quarter of 2025 compared to the previous year, demonstrating the company’s overall financial strength. The gaming division’s struggles are partially attributed to intense competition from Sony’s PlayStation and Nintendo’s Switch, with Xbox lagging in market share.
The competitive landscape has prompted Microsoft to reassess its gaming development strategy, leading to the closure of several internal studios focused on creating new titles. This move, while streamlining operations, raises questions about the long-term pipeline of original content for the Xbox platform.
The leadership changes at Microsoft Gaming also follow the departures of other key executives in recent months, including Chris Young, former head of business development, and Thomas Dohmke, former CEO of GitHub. Charlie Bell, head of security systems, has also transitioned to a different role within the company. These shifts suggest a broader period of internal restructuring at Microsoft.
Asha Sharma’s arrival is being closely watched by industry analysts. Her experience in AI could prove crucial as Microsoft seeks to integrate artificial intelligence technologies into its gaming experiences, potentially enhancing game development, personalization, and player engagement. However, the challenge will be to navigate a competitive market while addressing recent revenue declines and maintaining a strong content pipeline.
Phil Spencer will remain with Microsoft as an advisor through the summer, assisting with the transition and ensuring a smooth handover of responsibilities. His legacy at Xbox is one of expansion and innovation, having overseen the introduction of Xbox Live, the Xbox Game Pass subscription service, and the acquisition of numerous game studios. The future direction of Microsoft Gaming under Sharma’s leadership remains to be seen, but the company is clearly positioning itself for a new era in the rapidly evolving gaming industry.
