Microsoft is winding down its Copilot for Gaming initiative on mobile devices and has canceled its planned launch on Xbox consoles. Xbox CEO Asha Sharma announced the decision on May 5, 2026, as part of a broader strategy to retire features that do not align with the company’s future direction.
Revenue dropped to $5.3 billion as gaming division faces challenges
The cancellation coincides with a major leadership overhaul at Xbox. Sharma appointed four executives from her former CoreAI group to key roles. Jared Palmer joins as vice president of engineering and technical advisor. Tim Allen takes over head of Xbox design. Jonathan McKay leads growth efforts. Evan Chaki heads a new team focused on simplifying development workflows. David Schloss arrives from Instacart to oversee subscription and cloud services.
This restructuring follows a period of financial decline for the division. Gaming revenue dropped to $5.3 billion in the most recent quarter, down from $5.7 billion a year earlier. Hardware revenue fell by 33 percent during the same timeframe. Sharma stated that Xbox needs to move faster and address friction for players and developers. Kevin Gammill is leaving the company, while Roanne Sones is taking a leave of absence before transitioning to an advisory role.
The status of Copilot for Gaming on the PC Game Bar and the ROG Xbox Ally handheld remains unclear. Sharma has not addressed the future of these specific versions. The company has not confirmed whether these platforms will retain the feature or receive updates.
Sharma emphasized the importance of balancing promoted internal leaders with new external voices to push the business forward. The leadership changes aim to deepen the connection with the gaming community. The cancellation of the console version marks a significant shift in the company’s AI integration strategy for gaming hardware.
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