Key Takeaways
- • Private equity firms reportedly explored a joint acquisition of Microsoft's Xbox gaming business at a valuation of $100 billion to $150 billion (approx. 133 trillion to 199 trillion won), according to The Information.
- • The exploration remained at a brief preliminary stage and did not lead to actual negotiations with Microsoft, and the identities of the firms involved remain unknown.
- • Xbox fiscal 2026 revenue fell 7% year over year to $21.8 billion, hardware revenue dropped 29%, and profit margins were about 3%.
- • Xbox plans to cut 3,200 of its roughly 14,000 employees within a year.
- • Microsoft's commercial division head Judson Althoff denied the sale rumors in a Fortune interview, and the reported valuation would far exceed the $55 billion EA buyout.
Summary
The Information reported on October 20 that several private equity firms explored jointly acquiring Microsoft's (MS) Xbox gaming business in recent months. The discussed valuation reached $100 billion to $150 billion, a figure that far exceeds the $55 billion take-private of Electronic Arts by Saudi Arabia's Public Investment Fund, Silver Lake and Affinity Partners. According to The Information, the review ended at an exploratory stage and never progressed to negotiations with Microsoft. The identities of the private equity firms involved have not been disclosed.
The reported sale interest comes against a backdrop of weakening financials. Xbox revenue for fiscal year 2026 totaled $21.8 billion, down 7% from the prior year, with hardware revenue falling 29% and profit margins holding at roughly 3%. Xbox also plans to cut 3,200 jobs out of a workforce of approximately 14,000 within a year. The Information had previously reported in June that Microsoft considered a spinoff of Xbox, restructuring it as a wholly owned subsidiary, or forming a joint venture.
In an interview with Fortune published the same day as the latest report, Judson Althoff, who heads Microsoft's commercial division, denied the sale rumors, saying the company would not have put her on a business it intended to sell.
The EA transaction offers a precedent for private equity ownership of a major gaming publisher. EA went private in August after its $55 billion acquisition, including debt, by PIF, Silver Lake and Affinity Partners. Since then, the company has taken on approximately $18 billion (approx. 24 trillion won) in debt and reportedly told bond investors it plans to cut annual expenses by $700 million (approx. 929 billion won), a move some viewed as a signal of large-scale layoffs.
For consumers, Fortune reported that the internal estimated price for Microsoft's next-generation console, 'Project Helix,' is between $1,200 and $1,800 (approx. 1.59 million to 2.39 million won). Fortune also reported that a plan to restructure Game Pass into an a la carte, feature-based structure is under consideration.
The reported sale interest comes against a backdrop of weakening financials. Xbox revenue for fiscal year 2026 totaled $21.8 billion, down 7% from the prior year, with hardware revenue falling 29% and profit margins holding at roughly 3%. Xbox also plans to cut 3,200 jobs out of a workforce of approximately 14,000 within a year. The Information had previously reported in June that Microsoft considered a spinoff of Xbox, restructuring it as a wholly owned subsidiary, or forming a joint venture.
In an interview with Fortune published the same day as the latest report, Judson Althoff, who heads Microsoft's commercial division, denied the sale rumors, saying the company would not have put her on a business it intended to sell.
The EA transaction offers a precedent for private equity ownership of a major gaming publisher. EA went private in August after its $55 billion acquisition, including debt, by PIF, Silver Lake and Affinity Partners. Since then, the company has taken on approximately $18 billion (approx. 24 trillion won) in debt and reportedly told bond investors it plans to cut annual expenses by $700 million (approx. 929 billion won), a move some viewed as a signal of large-scale layoffs.
For consumers, Fortune reported that the internal estimated price for Microsoft's next-generation console, 'Project Helix,' is between $1,200 and $1,800 (approx. 1.59 million to 2.39 million won). Fortune also reported that a plan to restructure Game Pass into an a la carte, feature-based structure is under consideration.
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