Xbox CEO Asha Sharma launched Xbox Labs to explore emerging technologies after 3,200 layoffs. The group aims to turn new ideas into experiences for players. Sharma said, “Coding became the first major workload for agents because they can write, run, and test software.” This initiative helps make games more accessible.
The tech industry is evolving with AI, and the case is no different for gaming. Now Xbox CEO Asha Sharma wants Microsoft’s gaming division to explore “emerging technologies," such as AI in its games with Xbox Labs.
Xbox CEO Asha Sharma described Xbox Labs as a “small group of game makers, engineers and scientists whose job is to turn emerging ideas into things our players and developers can experience” in an internal memo, now shared on X. This may include AI-assisted modifications, compatibility tools and ways to make games available on hardware for which they were not originally designed.
Sharma’s announcement comes at a time when Xbox is going through major restructuring with 3,200 job cuts globally, or about 20 per cent of its entire staff. The gaming division has also merged or shut down some of its gaming studios as part of the restructuring.
AI agents can make help in games, like software
In the memo, Asha Sharma did not mention the term AI but did refer to agents helping game development, similar to how they are used for coding. “Coding became the first major workload for agents because they can write, run, and test software. Games share many of those same properties,” she said. As per the Xbox CEO, people spend more than 72 billion hours annually playing Xbox games, about five times the estimated time spent writing code worldwide.
The Xbox chief recognised recent developments in the gaming world where games were being rebuilt for different hardware with such tools. “Windows PC builds have been translated to run on Apple Silicon or ported to run inside a browser,” she added. “Perhaps more surprisingly, we've seen many of the biggest games in the world have been remixed into the source code of another.”
While Asha Sharma did not name any games in particular, as per reports, players online have made tweaks to some popular titles. For instance, some have added skateboarding to Call of Duty or getting Halo to run on a browser. Many such experiments use AI models to help modders port, rebuild or combine games.
Sharma said these projects challenged established assumptions about gaming – be it the link between software and hardware or the boundary between creating and playing. “While it is hard to predict the future of gaming, it is easy to see the possibilities in making great games easier to access, giving old games new life and allowing more players to become creators and co-creators,” she said.
Xbox Labs may challenge Xbox’s business model
The Xbox chief accepted that such developments in the gaming world may pose a challenge to the company’s business model, but it was good for players. “These are unmistakably good outcomes for players, even when (and sometimes because) they challenge our existing business models,” Asha Sharma wrote. “To explore these possibilities, I’ve asked Scott to stand-up XBOX LABS.” Sharma was referring to Xbox CTO Scott Van Vliet.
While Asha Sharma has mentioned in the past that the Xbox business was “not healthy,” the company has made some progress. Earlier this month, she reportedly told staff, “We've started to return to growth.”
Sharma also clarified that Xbox plans to share tools developed by the group with other developers. Xbox Labs will also allow the company to explore technology through game design without abandoning work already under way. The Xbox CEO added that existing priorities would remain unchanged, including its commitment to games, hardware, intellectual property and gaming communities.
Xbox is not the only one exploring the use of AI in games. Earlier this week, Fortnite maker Epic Games reportedly told developers on a Disney-linked game to adopt an "AI first" approach with tools like Claude, and no longer use “hand-written code.”
Epic Games CEO Tim Sweeney defended the move on X. "The aim isn't to do the same stuff with fewer people, but to enable everyone here to build MORE and BETTER stuff, and to bring the benefits to all teams using Unreal,” he wrote. Epic Games laid off about 1,000 employees in March this year.