Xbox Game Studios Loses Its Head as Sharma's Reset Rolls On

Five days after Xbox CEO Asha Sharma's internal letter outlined a sweeping "reset" of the division, the head of Xbox Game Studios is gone. Craig Duncan, who took over the role from Alan Hartman in November 2024, is departing this week after roughly 19 months in the position. Chief of staff Louise O'Connor is leaving alongside him.

The exits were first reported by The Game Business, which obtained Duncan's farewell email to staff. In it, he struck a positive tone: "Together, we set out to deliver high-quality games, strengthen the cultural fabric across our studios, and help shape the future of the business. I'm proud to say we delivered many flawless launches that drove business success for the company." He praised O'Connor as "a thoughtful, creative, and trusted partner" who "consistently championed the craft."

No official reason was given for either departure, and Microsoft hasn't issued a public statement. But the timing makes the subtext hard to ignore. Sharma's leaked letter laid bare some brutal numbers: Xbox has invested over $20 billion in the last five years while annual revenue has declined by nearly half a billion dollars. Her response has been a 100-day reset plan that multiple industry insiders believe will lead to significant layoffs at the start of July.

I've been covering Xbox's restructuring for weeks now, and these departures don't feel like isolated career moves. They feel like the next domino. When you combine Sharma's letter, the reported evaluation of a potential Xbox spinoff or sale, and Satya Nadella publicly saying Xbox must "finally become profitable" after 25 years, the picture is clear: the old guard is being moved out, whether voluntarily or not.

Who fills the gap?

Until a replacement for Duncan is found, all Xbox Game Studios developers will report directly to Xbox chief content officer Matt Booty. That's a lot of studios under one person's oversight, especially during a period where morale across the division is almost certainly fragile. Booty has been a fixture of Xbox leadership for years, but asking him to absorb the full XGS portfolio while the organization is mid-upheaval is a significant burden.

Both Duncan and O'Connor were Rare veterans. Duncan ran the studio from 2011 to 2024, overseeing the Sea of Thieves era, with prior stints at Codemasters, Midway, and Sumo Digital. O'Connor had been at Rare since 1999, working on everything from Conker's Bad Fur Day through to her role as incubation director. She moved into the chief of staff position at XGS in August 2025, following the cancellation of Rare's long-troubled Everwild. Their combined institutional knowledge at Rare alone spans decades.

What concerns me is the pattern. Last year's layoff wave already resulted in the cancellation of Everwild, ZeniMax's Blackbird, and Perfect Dark, plus the closure of The Initiative and cuts across studios including Turn 10. Reports suggest another round is imminent, with at least one more studio closure expected. If Xbox's answer to declining revenue is to keep cutting the people who make the games, I'm not sure what's left to reset. At some point, a restructuring stops being a strategy and starts being a hollowing out.

Duncan's farewell email mentioned "flawless launches" and "business success," but Sharma's letter told a very different story about the division's financial health. Someone's version of events doesn't add up, and the person who's still employed is the one whose version will shape what Xbox looks like a year from now.