Key information
Microsoft's Xbox division has failed to achieve a specific performance metric linked to executive compensation for the fifth time in six years. According to a proxy statement filed on October 21, the company set a fiscal 2026 target of 4.3% growth for Xbox content and services revenue. However, the division recorded a decline, with the compensation measure showing a 6% drop.
The performance criteria have evolved significantly since 2020. Initially, the goal focused on Game Pass subscriber growth, which was missed in 2021 and 2022. The metric transitioned to content and services revenue growth in 2023, resulting in misses for 2023 and 2024. Fiscal 2025 marked the only success, where revenue grew by nearly 15% against a 14% target.
This financial shortfall occurs alongside broader challenges for the division, including declining revenue and the announcement of 3,200 layoffs as part of a year-long reset. While CEO Satya Nadella's total compensation reached approximately $90.6 million for fiscal 2026, down from $96.5 million the previous year, the filing does not attribute this decrease directly to the Xbox performance miss.
Despite these setbacks, leadership maintains a long-term perspective regarding the division's future. CEO Asha Sharma has explicitly denied rumors of divestment, suggesting that the ongoing turnaround efforts for the Xbox business will likely require more than a single fiscal year to materialize.
