Microsoft’s 30% profit target for many Xbox Studios is what reportedly led to their games being published on PlayStation.
According to a report from Bloomberg’s Jason Schreier, based on an interview with Obsidian Entertainment head Feargus Urquhart, Microsoft has imposed an ambitious 30% profit target on many Xbox studios. That mandate has had wide-reaching consequences, including aggressive cost-cutting and the decision to release first-party games on PlayStation consoles.
Urquhart, who has led Obsidian since co-founding the studio in 2003, offered insight on how these pressures are affecting development teams. In meetings with his leadership group, he has been grappling with the fallout from Obsidian’s unusually busy release schedule in 2025, when the studio launched three games in a single calendar year. While one of those titles, Grounded 2, performed well, others, including Avowed and The Outer Worlds 2, fell short of Microsoft’s internal sales expectations after spending more than six years in development.
Urquhart explained that those lengthy production cycles are increasingly difficult to justify in today’s industry, where game budgets have increased from millions to tens or even hundreds of millions of dollars, making missed targets much riskier. Across the industry, this reality has led to widespread layoffs and studio closures, with Xbox itself cutting staff and canceling projects at a rapid pace.
With console sales declining, revenue growth flattening, and Microsoft focusing more heavily on artificial intelligence, the company is demanding stronger financial performance from its gaming division. According to Bloomberg, the 30% margin target has directly influenced Xbox’s strategy, pushing the company to publish more of its games on PlayStation in order to maximize sales beyond its own hardware ecosystem.
Urquhart believes survival depends on flexibility rather than chasing massive blockbusters. The studio is working to shorten development timelines, reuse technology, and balance large projects with smaller, experimental titles like Pentiment, which was inexpensive to produce and turned out profitable. Urquhart hopes Microsoft continues to value creative risk and long-term sustainability, even if that means accepting margins below 30%.
