Xbox has a new financial heavyweight champion, and it completely contradicts the division’s current leadership strategy. Yesterday, a massive leak surfaced online. According to longtime Microsoft insider Jez Corden, internal corporate emails reveal that Blizzard Entertainment finished the 2026 fiscal year as the highest-revenue PC and console studio under the Xbox umbrella.
Blizzard even managed to outearn the Call of Duty franchise. This revelation comes at a turbulent time for the gaming giant. Xbox is currently undergoing extreme restructuring to end studio autonomy. However, Blizzard achieved this massive success while operating with near-total independence.
A Historic Year for Blizzard
Blizzard President Johanna Faries recently sent an internal memo to boost employee morale. That email leaked, and it paints a highly successful picture. Faries announced that Blizzard secured the top revenue spot among Xbox’s traditional console and PC developers. (Microsoft excludes King and its Candy Crush revenue from this specific PC/console metric).
Consequently, FY25 and FY26 mark Blizzard’s first consecutive years of growth since FY17. Furthermore, Faries confirmed that FY26 stands as the third-highest fiscal year for top-line revenue in Blizzard’s entire history.
Two major titles drove this financial surge. The spring launch of the ‘Diablo 4: Lord of Hatred’ expansion brought in massive numbers. Meanwhile, ‘Overwatch’ maintained sustained player engagement and just recorded its best quarter since 2022.
The Xbox Restructuring Bloodbath
Blizzard’s success stands out sharply against the rest of the Xbox division. The company has faced severe disruption over the last few months. In February 2026, longtime CEO Phil Spencer retired. Microsoft then tapped Asha Sharma to take over. Sharma previously oversaw Azure AI and developer tools as the CoreAI Product President.
Under Sharma’s leadership, Microsoft Gaming reverted its name to Xbox in February. The company then rebranded again in May to a stylized “XBOX”. Immediately after, leadership triggered one of the largest restructurings in Xbox history.
This overhaul involves massive layoffs, strategic shifts, and selective divestments. Xbox plans to cut roughly 3,200 jobs by mid-2027. The company already executed about 1,600 of those cuts in July 2026, right at the start of Microsoft’s FY27. Furthermore, Microsoft sold off two developers: Undead Labs and Ninja Theory. They also allowed Compulsion Games and Double Fine Productions to transition back to independent ownership.
The Autonomy Contradiction
The real story here is the clash between Blizzard’s operational reality and Asha Sharma’s new vision for Xbox. Sharma strongly criticizes the fragmented, independent studio model she inherited. Her current restructuring explicitly aims to bring the entire organization under a unified operating and profit-and-loss model.
Despite this mandate, Blizzard operates totally differently. Microsoft acquired Activision Blizzard in October 2023 but never fully integrated the company into Xbox Game Studios. Microsoft kept Activision Publishing, Blizzard, and King as distinct business units. They even increased their autonomy by choosing not to replace departing CEO Bobby Kotick.
As of August 2026, Blizzard still operates strictly as a “limited-integration entity.” Therefore, the most independent business unit within Xbox just entered a massive consolidation period from a position of undeniable financial strength. Blizzard’s autonomy might not be the sole reason for its renewed growth, but its record-breaking numbers directly challenge the new CEO’s unified strategy.
