Xbox Cancels Copilot on Console, Overhauls Leadership to Reverse Sales Decline
Asha Sharma, Xbox's new CEO, is scrapping Copilot development on console and restructuring the company's leadership team with executives from Microsoft's CoreAI group. The moves signal a shift away from broad AI integration toward rebuilding core player engagement after a 9% year-on-year decline in gaming revenue and a 32% drop in Xbox hardware sales.
Sharma took over as Xbox CEO in February 2026 after spending two years leading Microsoft's CoreAI Product division. She replaces Phil Spencer, who retired after four years heading Xbox and 38 years at Microsoft.
New Leadership Team Focuses on Speed and Fundamentals
Sharma appointed five new leaders to drive execution and improve developer experience:
- Jared Palmer: Product, engineering, developer tools and infrastructure
- Tim Allen: Design across the Xbox experience
- Jonathan Mckay: Head of Growth
- Evan Chaki: Engineering team to streamline development
- David Schloss: Subscription and cloud business
In a memo to staff, Sharma said the organization was spending too much time on internal work instead of engaging with players. "Right now, it is too hard to ship impact quickly," she said. "We lack the depth we need in some of the fundamentals."
Canceling Copilot, Keeping AI Selective
Xbox will stop developing Copilot on console and wind down Copilot on mobile. Sharma framed the cancellations as practical steps to reduce friction for players and developers while sharpening focus on core features.
The decision does not signal a retreat from AI. In a February blog post, Sharma wrote that Xbox will continue applying AI where it enhances craft and player experience. "We will not chase short-term efficiency or flood our ecosystem with soulless AI slop," she said. "Games are and always will be art, crafted by humans and created with the most innovative technology provided by us."
Broader Strategy Shift
Xbox has also confirmed its next console, currently named Project Helix, and reduced the price of Xbox Game Pass to improve value for core players. These moves accompany Satya Nadella's acknowledgment that Microsoft faced its fourth gaming revenue decline in six quarters.
Sharma's strategy prioritizes depth over breadth. The company plans to ship fewer features, but better ones, while rebuilding momentum with loyal players.
For executives evaluating AI strategy, Xbox's approach offers a case study in cost discipline. Rather than pursuing AI integration for its own sake, the company is asking which AI applications actually serve players and which create friction. Learn more about AI strategy for executives, or explore AI learning paths for CEOs navigating similar organizational shifts.
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