Normally, I would be the first in line to reject claims of higher costs by a CEO, however even I cannot find RAM in the current market. Tough days if you are trying to build a PC my friends. Let us take a look at the problem at hand from the eyes of Asha Sharma Head of Xbox.
Asha Sharma has given the clearest executive explanation yet of why the entire console business is buckling, and it comes down to a single issue that is breaking the math. Speaking about her first hundred days running Xbox, she pointed to the one thing that's genuinely reshaping the hardware economics, which is that memory and storage costs are going "up 2.75 times rather than 50 percent down." That's it nothing more. At this point in a console generation, component prices are supposed to fall by roughly half as manufacturing matures, which is what historically let platform holders cut prices, bundle more storage, and finally start making money on the box. Instead, AI demand has flipped that curve completely, and Sharma added that costs jumped 50 percent in her first hundred days alone, with more to come.
To grasp why this is so much worse for Xbox than a simple price-of-parts problem, you have to understand how the console business actually makes its money, which is not on the console. Sharma was somewhat candid that Xbox subsidizes its hardware and is "losing money" on units because of memory and storage costs, meaning the $400 Series S and $650 Series X are reportedly sold at a loss with the expectation of recouping it through game sales, Game Pass, and store cuts over the generation. That model has one load-bearing assumption baked into it. It assumes component costs fall over time, so the per-unit loss shrinks and eventually flips to profit. Reverse that curve and the entire subsidy logic inverts, because every console sold loses more money as the generation goes on rather than less. The math doesn't just get harder, it runs backwards.
The 33% Drop Is the Symptom, Not the Disease
There are worse things coming. The damage is already showing up in the numbers, with Microsoft's most recent quarter posting a 33 percent year-over-year decline in Xbox hardware sales. Sharma attributed that drop to broader industry struggles and the memory shortage rather than to anything Xbox did wrong, which is a fair read given that the same DRAM squeeze just forced price hikes from Sony, Nintendo, and Valve in the same window. Here's the uncomfortable part though. A 33 percent hardware decline isn't a problem you fix with a better game lineup and that is the unfortunate part. At least this time we know it is not solely based on Xbox.
Why "Affordable Products" Is the Real Goal
What makes Sharma's framing genuinely revealing is where she pointed the next hundred days, calling the central task figuring out "how to make affordable products during that time." This is the crux of the issue, for many companies out there creating consoles in simply a cost higher than profit and prices rise but no one's salaries increase in the same proportion.
She paired it with a pointed line about her actual mandate, insisting it's "not a 30 percent accountability margin" and "not enterprise software margins" but to be "the number one gaming and entertainment company," which is a smart way of saying she's been freed from the profit targets that would make this cost environment completely unsurvivable. The honest read is that Xbox is bracing for a generation where hardware stays a loss leader far longer than planned, and the strategy is shifting toward Windows, services, and reach precisely because the box itself can't carry the business while components keep climbing.
The RAM issue is expected to continue at least until the end of 2028, therefore we might see some delays in hardware production for the foreseeable future. As we have said before Microsoft invested heavily in AI but at the same other parts of the business are suffering from it.
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