If you had to rank the three video game console manufacturers based on how well they’re doing commercially in 2025, the answer for numbers one and two could differ from person to person, with some seeing Nintendo as solidly in first, and others seeing PlayStation. But without a doubt, Microsoft and Xbox are in third place, and it’s from this position, from well behind its two biggest competitors, that Microsoft and Xbox management are reportedly asking its studios to hit profit margin goals far above the industry average.

A new report from Bloomberg shows that Microsoft and Xbox are setting 30% profit margin goals for its internal studios. This isn’t for every project, as the report clarifies that “Not every project is expected to hit the 30% profit threshold,” per Bloomberg’s sources, “but many Xbox developers and groups have been presented with the new target.”

The average profit margins for the rest of the industry have fallen between 17% and 22% since 2018, per the report and analysis from S&P Global Market Intelligence. Neil Barbour, analyst at S&P Global Market Intelligence, even distinguished 30% or higher margins as the kind of goal you’d set if you were “a publisher that is really nailing it.“

Thanks to court documents we saw as part of Microsoft closing out its Activision Blizzard acquisition in 2023, we know that just two years ago, the profit margin for Xbox and the gaming division sat at just 12% for most of 2022. Once that merger closed in October 2023, Bloomberg’s report claims that Microsoft’s chief financial officer, Amy Hood, implemented the new 30% goal, as if to say that Xbox needed to start making back the money that was spent on making franchises like Call of Duty, World of Warcraft, and Candy Crush first-party franchises.

Gambles like putting Call of Duty on Xbox Game Pass haven’t necessarily paid off though, or at least that’s how it seems, since in the last two years after that 30% profit margin goal was set, Microsoft has laid off thousands of employees within its gaming division, closed its own studios and cancelled several highly anticipated projects.

It’s worth pointing out that the layoffs aren’t entirely due to Xbox Game Studios not hitting the profit margin. We know that while that goal exists, Microsoft has been investing more into AI and would seemingly close, cut, and sell off any project to free up capital to invest even more. But knowing that the company’s leadership is asking its game studios to hit well above the industry average does help to explain how leadership gets to the conclusion that these mass layoffs and publishing its first-party titles on competing platforms are necessary.

Of course, you could argue that Amy Hood and Microsoft are setting the gaming division up to fail, because again, Microsoft is nowhere close to being the industry-leading titan we saw in its Xbox 360 days. The sentiment that Microsoft wants out of the video game business is one that continues to grow online, and if that’s the end goal for Microsoft, then its playbook of cutting projects from its expert developers, setting unreasonable profit margin goals, and constantly upsetting its consumer base with price hikes on products and services, while pushing features nobody asked for is a solid one.

The report continues to say that the projects likely to get priority within Microsoft and Xbox will be “cheap to make or deemed more likely to generate significant revenue windfalls,” which also sounds like we’re in for cheaply made games and live service bets that don’t try to do anything other than make as much money as possible.

A Microsoft spokesperson quoted in the report adds, “We look at the business as a whole, balancing creativity, innovation, and sustainability across a diverse portfolio of offerings. As with any creative business, sometimes that means making hard decisions and stopping work on things that are no longer working for a variety of reasons, and shifting resources toward the projects that are more aligned with our direction and priorities.”

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