‘No longer a priority’: Xbox being sunsetted as Microsoft shifts focus to AI, co-founder says

Microsoft’s long-standing gaming console system, Xbox, may soon come to an end as one of its co-founders hinted at the company shifting its focus toward AI rather than the gaming system.

In an interview, Xbox co-creator Seamus Blackley claimed the gaming console is no longer a priority for Microsoft, according to KTLA 5.

“[Microsoft CEO] Satya Nadella has made an incredible number of bets and invested an incredible amount of money and credibility in the transform model AI future,” Blackley said. “Xbox, like a lot of businesses that aren’t the core AI business, is being sunsetted. They don’t say that, but that’s what’s happening.”

Xbox co-founder predicts console will be phased out under new CEO

Blackley forecasted that Xbox’s days may be numbered under the new CEO of Microsoft’s gaming department.

“I expect that the new CEO [of Microsoft Gaming], Asha Sharma’s job is going to be as a palliative care doctor who slides Xbox gently into the night,” he said.

As artificial intelligence has taken a front seat in many leading tech companies across the U.S., Microsoft said its leadership will view its video games with an “abstract” mindset, similar to how it views AI.

“The natural consequence of the focus on AI is that AI abstracts every problem from the minds of the executives who believe in it. We’re abstracting the problem of games as well,” Blackley told GamesBeat’s Dean Takahashi. “There’s a core belief … that AI will subsume games like it will subsume everything.”

“The job of all these people is to just gently usher all of these business units into the new world of AI. That’s what you’re seeing here,” he continued. “Whether or not you agree with it, whether you agree with AI having the potential to do that, whether AI will be successful, is a separate matter.”

Microsoft initially released its highly coveted Xbox in 2001, after Sony’s PlayStation already held a majority share of the gaming console market, competing with the likes of Nintendo’s Nintendo 64 and Sega’s Saturn.

Since its inception, the Xbox has seen three additional generations, with the Xbox 360 releasing in 2005, the Xbox One in 2013, and the Xbox Series S and Series X releasing in 2020.

Over the years, gaming fans have pitted the two larger consoles, Xbox and PlayStation, against each other, creating the “console wars.”

Xbox hardware sales struggle with double-digit declines each quarter in years-long slide

Xbox, as of late, has been struggling to sell its hardware, with year-over-year declines of 29% in quarter one (Q1) of 2026, according to IGN. In Q4 of 2025, hardware sales were down 22% as well. From Q2 2024 to Q3 2025, Xbox’s hardware revenue was down at least 29% in each quarter, with a whopping 42% revenue decline in Q4 of 2024.

In light of Xbox’s poor hardware revenue, Blackley took aim at Microsoft CEO Satya Nadella, who assumed the position in 2014, and has been outspoken about the company prioritizing AI.

“I think younger me would be screaming about this and saying, ‘What the hell? Why would you put somebody in charge of a record label who didn’t like records?’ Looking at it now from my perspective … I do still feel that way,” Blackley said. “But at the same time, I understand exactly why it is. I know that, again, Satya is holding a hammer and everything is a nail.

“There’s a nail with an Xbox logo on it. He’s applying the AI person to it. He has to show shareholders and the press and the world that he is all in on this investment,” he continued. “He has to show them that he believes generative AI is going to fix games and make it profitable. He has to make this move. It doesn’t matter what you think about it. I don’t think he had any choice.”

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