Why Xbox is Rethinking its AI in Gaming Strategy

Asha Sharma, Chief Executive Officer at Microsoft Xbox, has told employees that she will appoint new leaders from Microsoft’s CoreAI group and stop development of Copilot on console.

The CEO frames the changes as part of a company-wide overhaul to reinvigorate growth after a period of falling sales and slower delivery.

Asha says: “We need to evolve how we work and how we are organised across our platform.

“Right now, it is too hard to ship impact quickly. We spend too much time inward instead of with the community, and we lack the depth we need in some of the fundamentals.”

Leadership changes to reset strategy

Asha was appointed as Xbox CEO in February 2026 after two years as Microsoft’s President of CoreAI Product.

She succeeds Phil Spencer, who retired after 38 years at Microsoft and four years as Chief Executive Officer of Microsoft Gaming.

Her appointment follows a January 2026 report that shows a 9% year-on-year decline in total gaming revenue and a 32% fall in Xbox hardware sales.

The reset aims to bring fresh consumer and technical depth into the organisation.

“In this next chapter, we are bringing in new leaders with consumer and technical expertise we do not yet have”, Asha says in her memo.

She draws on her CoreAI experience to select leaders to drive execution and fundamentals.

The new leadership team will include former CoreAI and industry figures who are tasked with speeding up delivery and improving developer experience. Their briefs span product, design, growth and infrastructure.

The incoming leaders are:

• Jared Palmer will lead product, engineering, developer tools and infrastructure
• Tim Allen will lead design across the Xbox experience
• Jonathan Mckay will serve as Head of Growth
• Evan Chaki will run an engineering team to streamline development
• David Schloss will lead the subscription and cloud business.

Asha’s early focus is on creating clearer ownership, strengthening fundamentals and aligning teams to player needs.

She shows that Xbox will prioritise depth over breadth in its next phase.

Product decisions and customer focus

Asha confirms that Xbox will cancel Copilot development on console and begin winding down Copilot on mobile.

The goal is to reduce friction for players and developers while sharpening focus on core features.

Asha says: “Today, we promoted leaders who helped build Xbox, while also bringing in new voices to help push us forward.

“As part of this shift, you’ll see us begin to retire features that don’t align with where we’re headed.”

She positions these choices as practical steps to improve quality and velocity. Shipping fewer, better features is presented as a near-term priority.

Since Asha’s arrival, Xbox has also confirmed its next console, currently named Project Helix.

It has reduced the price of Xbox Game Pass to improve value for its core audience.

Market position and approach to AI

In a company statement on 30 April, Microsoft CEO Satya Nadella acknowledged the fourth gaming revenue decline in the past six quarters, with a focus on improvements in Windows performance and a renewed focus on core features.

He says these shifts extend to Xbox, where the team is “recommitting to our core fans and players, and shaping the future of play”.

The strategy seeks to stabilise performance and rebuild momentum with loyal players.

Asha underscores that stopping Copilot on console does not mean stepping back from AI entirely.

In a Microsoft blog post in February, she writes that Xbox will continue to apply AI where it enhances craft and player experience.

Asha says: “As monetisation 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.”

The company’s stance is to use gen AI judiciously while protecting creative quality.

With new leadership, a tighter roadmap and a focus on fundamentals, Xbox is aiming to rebuild engagement and deliver long-term value for players.