According to people familiar with the matter, in recent months, several private equity investment firms have considered the possibility of acquiring Microsoft’s Xbox gaming business. If the deal is completed, the valuation of this business could reach $100 billion to $150 billion.
These people familiar with the matter stated that such discussions among private equity firms are only in the preliminary exploration stage and have not evolved into formal negotiations with Microsoft. However, this also indicates that if Microsoft encounters difficulties in turning around its struggling gaming business, the company may still be able to find a buyer. It is not yet possible to confirm the specific identities of these private equity firms.
A Microsoft spokesperson stated in a statement, "_Xbox will not be sold," and refused to make any further comments.
Based on the revenue situation of that business department, the upper limit of acquisition prices considered by these investment institutions is roughly comparable to the scale of the recent leveraged buyout transaction targeting another gaming giant – Electronic Arts ( Electronic Arts ).
In June of this year, reports indicated that Microsoft had considered splitting up or reorganizing the Xbox business unit into a wholly-owned subsidiary (a move that would have made it easier to sell). Additionally, Microsoft also considered forming a joint venture with other partners. Since then, under the leadership of CEO Satya Nadella ( Asha Sharma ), the management team of Xbox has been working to improve the operational status of the unit and accelerate its growth.
Xbox The business division includes Activision Blizzard (Activision Blizzard), which Microsoft acquired in 2023 for $75 billion as a game publisher. This division has approximately 14,000 employees, but in recent years, it has been plagued by extremely low profit margins and declining sales. Previously, Microsoft hoped to generate significant new revenue by acquiring numerous game studios, but the actual results did not meet expectations.
In the fiscal year ending June, Xbox's revenue decreased by 7% to $21.8 billion. As Microsoft disclosed earlier this year, the department's "accountable profit margin" (similar to the adjusted profit margin) has been declining over the past year and had dropped to just 3% as of June.
Since taking over the department in February this year, Sharma has been committed to reversing its declining business. It is reported that in July, she proposed a plan to cut 3,200 jobs (about 20% of the total workforce) within the next year, and to increase investment in games such as Halo and Minecraft (Minecraft).
However, this department accounts for a relatively small portion of Microsoft's overall business, contributing only about 7% of the total revenue. At the same time, Microsoft is investing a large amount of funds in data centers and other artificial intelligence ( AI ) projects, which has had a negative impact on its free cash flow.
Given that few buyers are able to raise $100 billion or more to acquire Xbox, if an acquisition does take place, it is more likely to involve multiple institutions working together.
If the transaction involving Xbox goes through, its scale will far exceed that of the largest leveraged buyout in history: Earlier this year, Silver Lake Capital (Silver Lake), Saudi Public Investment Fund (Public Investment Fund), and Jared Kushner, Trump's son-in-law, through his company (Affinity Partners), privatized Electronic Arts via a leveraged buyout. The deal valued the gaming company at $55 billion, including debt. This valuation is approximately seven times Electronic Arts' annual revenue of about $7.5 billion over the 12 months up to March; however, unlike Xbox, Electronic Arts does not have a hardware business that would drag down its profit margin.
Despite the rapid growth of the gaming industry during the COVID-19 pandemic, it has since faced pressures: sales have stagnated, and the boom in artificial intelligence has increased the costs of the hardware required to manufacture gaming consoles. One sign of these rising costs is that Xbox recently estimated that a gaming console to be launched by 2028 could have a price tag of up to $1,200 to $1,800.
The host business of Xbox competes with PlayStation under Sony and Nintendo. Sony's "Games and Network Services" department, which operates PlayStation, had revenue of approximately $29.8 billion in the fiscal year 2025, remaining relatively stable compared to the previous year; however, both the sales volume of its gaming consoles and the sales of its self-developed game products have seen a decline.
