Microsoft Gaming Executive Phil Spencer to Retire After 38-Year Legacy

Phil Spencer, Microsoft's head of gaming, is stepping down after 38 years at the company that owns Xbox.

"When I first entered Microsoft's offices as an intern in June 1988, I couldn't have foreseen the products I would contribute to creating, the clients and competitors we would engage with, or the amazing teams I would be honored to be part of. It has been a remarkable journey and an absolute honor," Spencer said in a statement.memo to staffon Friday. "Last autumn, I informed [Microsoft CEO Satya Nadella] that I was considering taking a step back and beginning the next phase of my life. From that point forward, we agreed on handling this transition thoughtfully, maintaining stability, and reinforcing the foundation we have established."

His departure occurs as Xbox, which boasts more than 500 million monthly active users, marks its 25th anniversary this year.

Xbox has always been more than just a business. It's a dynamic community of players, creators, and teams who are genuinely passionate about what we develop and the way we do it," Spencer added. "And it requires a careful, well-considered strategy for the future.

Asha Sharma, who has been the head of Microsoft's CoreAI product, will take over from Spencer as the executive vice president and CEO of the gaming division.

I am entering a workplace influenced by generations of artists, engineers, designers, writers, musicians, operators, and others who have created worlds that have brought joy and deep personal significance to hundreds of millions of players. The quality of work here is outstanding, and it is enhanced by Xbox, which was established on the belief that the power of games brings people together and advances the industry," she said. "Thank you to Phil for his leadership, and to every studio, platform, and operations team that helped build this foundation. We are guardians of some of the most cherished stories and characters in entertainment and bring players and creators together through the fun and community of gaming in entirely new ways.

Spencer will remain in an advisory capacity throughout the summer to assist with the leadership change.

"I am eager to be the first to welcome her to this amazing team. Collaborating with her over the past few months has instilled in me a lot of confidence," he stated. She possesses true curiosity, clear thinking, and a strong dedication to comprehending players, creators, and the choices that influence our future. We recognize this is a significant time for our fans, partners, and staff, and we are determined to do it correctly.

Besides Spencer's retirement, Sarah Bond, the president of Xbox, is leaving the company.

Sarah played a key role during a pivotal time for Xbox, influencing our platform strategy, growing Game Pass and cloud gaming, assisting with new hardware releases, and leading some of our most important milestones," Spencer stated. "I appreciate her collaboration and the influence she's made, and I hope she has great success in her future endeavors.

In the second quarter of fiscal year 2026, Microsoft's games division saw a 9% drop in revenue, with Xbox content and services revenue declining by 5% and 6% respectively. In a message to employees, Sharma recognized that the gaming industry is experiencing "a period of rapid change" and emphasized that Microsoft and Xbox must "move forward with clarity and confidence."

Before we do anything, we need to have amazing games that players love. Memorable characters, stories that evoke emotions, innovative gameplay, and creative excellence," she stated. "We will support our studios, invest in well-known franchises, and back daring new concepts. We will take chances. We will explore new categories and markets where we can truly make a difference, based on what players value most.

She further stated that the company would "recommit" to its fundamental Xbox audience and gamers, as well as to the developers who create the wide-ranging worlds and experiences that are cherished by players globally.

Gaming today exists across various devices, rather than being confined to one specific piece of hardware," Sharma stated. "As we grow across PCs, mobile platforms, and the cloud, Xbox should offer a smooth, quick, and deserving experience for the communities we support. We will eliminate obstacles so developers can create once and access players everywhere without any sacrifices.

As part of this initiative, Matt Booty has been appointed as EVP and chief content officer, and will directly report to Sharma. With his guidance, Microsoft Gaming has expanded to include almost 40 studios across Xbox, Bethesda, Activision Blizzard, and King, which feature popular franchises such as "Halo," "The Elder Scrolls," "Call of Duty," "World of Warcraft," "Diablo," "Candy Crush," and "Fallout."

"He recognizes the artistry and difficulties involved in creating exceptional games, has managed teams that produce acclaimed results, and has gained the confidence of game developers throughout the industry," she added.

Furthermore, Sharma mentioned that Microsoft would develop innovative business models and approaches by establishing a "shared platform and tools that enable developers and players to create and share their own narratives."

As monetization and AI continue to develop and shape this future, we will not focus on short-term efficiency or overload our ecosystem with lifeless AI content. Games are and always will be art, made by humans, and developed using the most cutting-edge technology we provide," she stated. "The next 25 years will belong to the teams that are willing to create something unexpected, something no one else is ready to attempt, and have the perseverance to see it through. We've done this before, and I'm here to assist us in doing it again. I want to bring back the rebellious spirit that originally built Xbox. It will require us to constantly question everything, reevaluate our processes, safeguard what works, and have the courage to change what doesn't. Thank you for welcoming me into this journey.

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