Microsoft’s stock price is currently down bad, but just how much have shares slid lately? A lot. So much so that June 2026 is expected to be Microsoft’s worst month since December 2000 based on percent decline in a single month. The stock is down about 20% in June, which would be the worst since the 24% decline in December 2000.
This is happening at the same time that Xbox CEO Asha Sharma is implementing a “reset” of the Xbox business that may include mass layoffs and studio closures.
A year ago, Microsoft’s total market cap was around $4 trillion, but it’s dropped off mightily since then, falling more than 25% in the past year to around $2.75 trillion today.
But why is Microsoft stock falling while the company continues to grow revenue and beat Wall Street estimates? One theory is that Microsoft is spending a lot of money on capital expenditures as part of its huge AI-based infrastructure buildout. This negatively affects free cash flow, putting limits on how much Microsoft can pay in dividends and spend on stock buybacks, both of which investors normally like to see.
How does Xbox factor in?
Xbox’s struggles of late have been well documented, and in response, Sharma is putting Xbox through a “reset” that is expected to result in major changes that include layoffs, studio closures, and game cancellations. We could learn more about these plans soon, as Microsoft’s fiscal year ends today, June 30, and that’s the timeline some have reported regarding when changes could be announced.
Windows Central reported that Microsoft CFO Amy Hood is driving the upcoming cuts at Xbox. The report said she has “demanded a variety of savings at Xbox to offset losses.”
Microsoft is a gigantic company–one of the largest on Earth–and Xbox is just one part of the overall business. It remains to be seen if the changes coming to Xbox would move the needle in any way with regards to Microsoft’s stock price. The human cost of the forecasted Xbox cuts could be severe, with Microsoft reportedly looking to close beloved developers and cut staff.
Recently, Sharma confirmed that Xbox’s accountability margins only amount to a 3% profit, which isn’t exactly great considering how Microsoft has invested billions of dollars in acquiring studios and publishers in recent years.
The return on investment is not looking good, especially when games are becoming more expensive and are sold to a much smaller playerbase when compared to the PS5 and Nintendo Switch, while recent Game Pass price hikes saw millions of people cancel their memberships.
Reporter Jason Schreier reminded people that a business with 3% margins–which means for every $100 made, the company spends $97 and keeps $3–could be doing just fine. However, he pointed out that some of Microsoft’s other businesses have 40%+ margins, which in turn makes it more challenging to convince higher-ups to invest in a business like Xbox.
One possibility for the future of Xbox is having it get spun out from Microsoft, but it remains to be seen if that will actually happen. Keep checking back with GameSpot for more.
