Microsoft’s head of gaming, Phil Spencer, is retiring after 38 years in a range of roles at the company. He is best known for steering Microsoft’s gaming division and the Xbox brand through a period of major change. His successor will be Indian-origin executive Asha Sharma.

Sharma most recently served as president of product development for Microsoft’s CoreAI division. Before rejoining Microsoft in 2024, she was chief operating officer at Instacart and earlier vice-president of product at Meta.

Spencer joined Microsoft as an intern in June 1988. “It’s been an epic ride and truly the privilege of a lifetime,” he said in a note to staff.

He became head of the gaming division in 2014, taking over from Marc Whitten shortly after Satya Nadella assumed the role of chief executive, replacing Steve Ballmer.

Microsoft Gaming now faces growing pressure from rising costs linked to tariffs, intensifying competition and uncertain consumer spending. Last month, the company reported that gaming revenue fell by around 9.5 per cent in the December quarter.

The business also completed its $69 billion acquisition of Activision Blizzard in 2023, a deal that drew prolonged regulatory scrutiny across multiple markets.

Nadella confirmed Spencer’s retirement in an internal memo. “Last year, Phil Spencer made the decision to retire from the company, and since then we’ve been talking about succession planning. I want to thank Phil for his extraordinary leadership and partnership. Over 38 years at Microsoft, including 12 years leading Gaming, Phil helped transform what we do and how we do it,” he wrote.

During his tenure, Spencer worked across a wide range of products, including the CD-based Encarta encyclopaedia, Microsoft Money, Microsoft Works and Microsoft Picture It!. He became general manager of Microsoft Studios in 2008 before being promoted to corporate vice-president in 2009.

Microsoft also announced that president Sarah Bond will leave the company. Xbox Game Studios chief Matt Booty will move into the role of chief content officer, reporting to Sharma.

Sharma said the company would seek to refocus on its core audience. “We are recommitting to our Xbox fans and players. We will celebrate our roots with a renewed commitment to console gaming, which has shaped who we are and connects us to the developers building ambitious experiences,” she said.

Earlier in her career, Sharma spent two years in marketing at Microsoft before leaving in 2013.