Microsoft ends Copilot AI on Xbox to help ‘get the business back on track,’ as new CEO simultaneously welcomes AI executives into the fold

A CNBC report says there’s been a significant leadership shakeup at Microsoft’s Xbox division, and if you’re not a fan of AI then you might want to avert your eyes. Xbox CEO Asha Sharma, who came into the role in February after spending two years as president of Microsoft’s CoreAI Product division, has tapped at least four of her former CoreAI fellows for key roles in Xbox leadership.

Jared Palmer, formerly vice president of CoreAI (and, prior to that, vice president of AI at AI company Vercel), is the new vice president of engineering at Xbox, and a technical advisor to Sharma. In a memo sent to employees, Sharma said Palmer will work “directly with me on our most complex product and engineering problems, with a focus on developer tooling, taste, and infrastructure.”

Tim Allen, senior vice president of CoreAI Design, will lead design at Xbox, “bringing together product design, design engineering, research, and creative with a fan-first focus.” Former CoreAI head of growth Jonathan McKay will take on a similar role at Xbox, while former CoreAI general manager Evan Chaki will lead a new “forward-deployed engineering group focused on removing repetitive work, simplifying development, and improving how we operate.”

At least one non-Microsoft executive has also been brought aboard the good ship Xbox: David Schloss, previously the senior director of product growth at Instacart, is now head of subscriptions and cloud at Xbox.

“We need to evolve how we work and how we are organized across our platform,” Sharma wrote in the memo. “Right now, it is too hard to ship impact quickly. We spend too much time inward instead of with the community, and we lack the depth we need in some of the fundamentals.”

Palmer confirmed his move on X, where he said he’ll be “focused on building world-class tools, services, and experiences for developers and players across the Xbox ecosystem.” An Xbox representative confirmed with PC Gamer that the CNBC report is accurate.

That’s a lot of AI horsepower at the top of Xbox, although I wouldn’t read too much into it at this point. Talking about “removing repetitive work” and “ship[ping] impact quickly,” whatever that means, certainly has a whiff of the ol’ AI will save us, but it’s not uncommon for executives taking new roles to bring people they’re familiar with along with them—and that’s doubly true in cases where the previous leader’s strategy has been discredited and abandoned, as is this case here.

And in her own message on X confirming the changes, posted a few hours after the Xbos leadership shakeup was first reported, Sharma suggested that Xbox is actually moving back from its focus on AI, or at least slowing it down.

“Xbox needs to move faster, deepen our connection with the community, and address friction for both players and developers,” Sharma wrote. “Today, we promoted leaders who helped build Xbox, while also bringing in new voices to help push us forward. This balance is important as we get the business back on track.

“As part of this shift, you’ll see us begin to retire features that don’t align with where we’re headed. We will begin winding down Copilot on mobile and will stop development of Copilot on console.”

Ending Copilot AI development on Xbox while simultaneously bringing a bunch of CoreAI guys onto the Xbox leadership team is a surprise twist, and I’m really not sure what to make of it—except that it could be read as Microsoft being pretty serious about an Xbox turnaround: It recognizes that Xbox customers aren’t happy, it’s got at least some idea as to why, and it’s committed to doing something about it.

But it could also be taken as merely going with the broader flow at Microsoft, which has recently dialed back on the presence of Copilot in Photos, Notepad, and other elements of Windows. But Microsoft also recently renamed Office to the “Microsoft 365 Copilot app.” Make of it what you will, I guess.

Sharma has wasted no time putting her stamp on the post-Phil Spencer Xbox world. Along with ending the maligned “This is an Xbox” marketing campaign, she’s also overseen a reduction in Game Pass prices (and services) and acknowledged that Microsoft just doesn’t have the juice when it comes to PC gaming; at the end of April, after less than three months in the job, Sharma said “player and revenue growth has not yet met our ambition.” Given all that, it’s clear that Xbox isn’t as dead as Seamus Blackley predicted, but I have no doubt we’ll be seeing even more big changes coming in the future.