Xbox confirms hardware costs are exploding, and that's bad news for the next Xbox and PS6

Xbox CEO Asha Sharma and head of Xbox Game Studios Matt Booty have co-authored a new blog post detailing the next 100 days at Xbox, which outlines the company's hurdles in the coming future. Some will be much easier to navigate than others.

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The post on Xbox Wire put some harsh realities into the public eye, such as Xbox ending the year at about a 3% accountability margin, and that being down year-over-year. Additionally, the post states that over the past five years Xbox has spent $20 billion on ongoing investments, which includes content development (games), platform improvements, and a hardware subsidy, yet its annual revenue has declined "nearly half a billion during that time. Going forward, this cannot continue". Notably, that $20 billion total doesn't include the acquisition of Activision Blizzard King.

Another struggle is the ongoing hardware component crisis, spurred by AI companies' endless lust for more compute. AI is consuming the world's hardware for dedicated data centers, etc., straining other electronic markets, particularly gaming hardware, as components within those devices become scarcer as manufacturers shift to making components for AI-specific hardware.

"We are in a hardware component crisis. When I joined as CEO in February, the price we paid for console storage components was over 2x as high as we paid last fall. These costs have since doubled again. And as we plan for the 2027 holiday season, we expect another significant increase, taking us over 5x the prices we paid only two years earlier. Memory costs have followed a broadly similar trajectory," the letter explains

Sharma explained that since she joined as Xbox CEO in February, the price Xbox was paying for console storage components was over 2x what it was paying in the previous Fall, and as of now, that figure has jumped double again. Furthermore, Sharma expects the prices to continue increasing, which certainly doesn't bode well for the prices of the next Xbox, and even the PlayStation 6, which isn't immune to the hardware crisis.

"While the entire industry is facing a components crisis, we believe we have been impacted more greatly than many of our peers due to the choices we made over the last half decade. We are currently unable to make as many consoles as players want to buy, and we need a new business model and partnerships for hardware as we remain committed to Helix," reads the letter