Microsoft Appoints AI Executive Asha Sharma to Lead Xbox as Phil Spencer Retires After 38 Years
Microsoft has confirmed a significant leadership transition in its gaming division, with Phil Spencer stepping down after nearly four decades at the company and Asha Sharma, a former Instacart executive with a background in artificial intelligence, appointed as his successor.
Microsoft chief executive Satya Nadella informed staff of the change in an internal memo, noting that Spencer had made the decision to retire and that succession planning had been under way for some time. Nadella credited Spencer with transforming the gaming business over more than a decade at its head, saying he had helped nearly triple its scale through a combination of organic growth and major acquisitions.
Spencer joined Microsoft in 1987 and took charge of its Xbox division in 2014, the same year Nadella became chief executive. At that point, the gaming unit was under considerable scrutiny, with Sony outselling Xbox on consoles and some investors calling for Microsoft to divest its consumer hardware interests. Spencer made the case for consolidating hardware, software and game development under a single structure, a move Nadella ultimately backed.
During his tenure, Spencer oversaw the acquisition of Minecraft developer Mojang and, more recently, spearheaded Microsoft's $75 billion purchase of Activision Blizzard in 2023, one of the largest deals in the history of the games industry. The transaction gave Microsoft ownership of major franchises including Call of Duty, which the company subsequently made available through its cloud gaming service.
Despite that expansion, Microsoft's gaming revenues fell by approximately 10% in the quarter ending December 2024 compared with the same period a year earlier, a steeper decline than the company had anticipated. Overall Microsoft revenues grew by nearly 17% in the same period. The company also disclosed an impairment charge in its gaming segment in January, without specifying the amount. Current generation Xbox consoles have continued to lag behind Sony's PlayStation and Nintendo's Switch in market share, and Microsoft has closed several game development studios over the past year.
Sharma, who joined Microsoft in 2024 from Instacart where she served as chief operating officer, will take on the role of gaming chief executive and report directly to Nadella. Prior to Instacart, she spent four years as a vice president of product and engineering at Meta and also held a marketing role at Microsoft earlier in her career. Most recently at Microsoft she has served as president of product within the company's Core AI division, working on tools such as Foundry, a platform designed to help third-party developers integrate AI models into their applications.
In a message to gaming staff, Sharma set out her priorities, including a renewed commitment to console gaming and to the developer community. She also addressed the role of artificial intelligence in the industry directly, stating that Microsoft would not use AI to produce low-quality content at the expense of creativity. She described games as an art form created by humans and said the company's AI capabilities should serve that purpose rather than undermine it.
Matt Booty, who leads Microsoft's gaming studios, will continue in post and report to Sharma as executive vice president and chief content officer. Sarah Bond, who had served as president and operating chief of the Xbox unit, will leave the company. Bond said publicly that she had spent time with Sharma during the transition period and expressed confidence in her successor's ability to lead the division.
Spencer's departure follows a broader wave of senior exits at Microsoft. The company's business development chief Chris Young and GitHub chief executive Thomas Dohmke both left in 2025, while Charlie Bell, previously the company's most senior security executive, moved to an individual contributor role earlier this year.
Industry Impact and Market Implications
The appointment of an AI-focused executive to lead one of the world's largest gaming businesses signals a broader strategic pivot that extends well beyond personnel. Microsoft appears to be repositioning Xbox not purely as a games brand but as a technology platform, with AI capabilities increasingly central to how it competes with Sony and Nintendo.
Sharma's background in AI product development and platform scaling suggests Microsoft may look to differentiate through software and services rather than attempting to close the hardware gap with rivals on traditional console metrics alone. Her work on AI integration tools gives her direct experience of how large-scale platforms can be adapted to incorporate emerging technologies, experience that could be applied to game development pipelines, personalisation, and cloud gaming infrastructure.
However, the transition carries risk. Gaming audiences are deeply attached to the culture and creative identity of established franchises, and any perception that AI is being used to reduce investment in human-led development could damage relationships with both players and independent studios. Sharma's explicit statement distancing Microsoft from what she called low-quality AI content may be a deliberate effort to pre-empt that concern, but how that commitment translates into practice will matter considerably more than the language used to describe it.
The financial pressures facing Xbox are substantial. A double-digit revenue decline in a quarter where the wider business grew strongly suggests the Activision Blizzard acquisition has not yet delivered the commercial returns Microsoft anticipated. With studios closed and console sales trailing competitors, the incoming leadership will need to demonstrate both operational discipline and a credible creative strategy. Whether Sharma's technology and commerce background equips her for the cultural complexity of the games industry remains an open question that the market and Microsoft's gaming community will be watching closely.
