Xbox Private Equity Buyout Talk Hits $150B as Microsoft Says No

A record valuation, and a firm no

Several private equity firms recently looked into buying Microsoft's gaming business at a valuation of $100 billion to $150 billion, according to The Information. The talks were exploratory, did not last long, and never became negotiations with Microsoft. When the outlet asked for comment, a Microsoft spokesperson said, "Xbox is not for sale."168 The firms have not been named, and nobody has said which assets would have been part of a deal.24

Microsoft's reply did not settle the question, and it is not hard to see why. Xbox CEO Asha Sharma said the same words to The New York Times in late September. She also said the company would "look at the right partnerships, the right operating model and everything needed" to make the business succeed.10 Those two statements together are the most important context for this story. Microsoft has ruled out a sale. It has not ruled out bringing in partners or changing how Xbox is structured.

How the coverage split

Outlets agree on the basic facts: the price range, the short-lived talks, the anonymous buyers, and the denial.2313 They disagree on what it means.

The more careful outlets stress that investors looking at a company is not the same as the company looking for a buyer. Power Up Gaming points out that the price range is not an agreed price and that the report signals no changes to Game Pass, console support or upcoming games.1 Digital Citizen adds that private equity firms study large businesses all the time without making offers.

Other coverage leaned the other way. iXBT ran its story under a headline asking whether Microsoft is preparing to sell Xbox.9 GuruFocus described the firms as "contemplating" a purchase and suggested Microsoft might sell if its turnaround plan fails. Wccftech gave the report an 85% "highly likely" credibility rating, citing The Information's earlier accurate reporting on Xbox layoffs. Still, it said the report does not show that a sale is actually on the table.3

The careful reading is the right one about the deal itself. No offer exists, and nothing suggests Microsoft took part. But treating the report as noise would also be a mistake. On the same day, Fortune reported that several current and former employees believe Xbox is being prepared for a sale, spinoff, outside investment or conversion into a subsidiary. Fortune also reported that a high-level presentation exploring those options was made after Sharma took over.6 Microsoft executive Judson Althoff disputed that view. He argued the company would not have put "one of the best leaders we have" in charge of a business it planned to sell.62

Why the numbers attract private equity, and why they're a problem

Xbox revenue fell 7% to about $21.8 billion in the fiscal year that ended in June, roughly 7% of Microsoft's total revenue.3 Hardware revenue dropped 29%, and content and services fell 5%.2 Most worrying, the division's adjusted profit margin has fallen to about 3%.83 Satya Nadella has said publicly that Xbox needs to start pulling its financial weight.

Those figures help explain why buyout firms would be interested. A large business with famous franchises, earning far less than it probably could, is the kind of asset private equity likes to buy: cut costs, focus on the most profitable products, and sell later for more. The franchises are well known: Call of Duty, Minecraft, Diablo, The Elder Scrolls, plus the Game Pass subscription and a console platform.29

The same figures also suggest why the talks ended quickly. At the top of the range, buyers would be paying almost seven times annual revenue, which is my own rough calculation from the reported numbers. That is a very high price for a business with a 3% margin. A leveraged buyout depends on the target's cash flow to pay down the debt used to buy it. A 3% margin on about $22 billion in revenue leaves little room for interest payments on a loan that size. This is analysis, not something The Information reported. But it fits the picture of a deal that fell apart before anyone called Microsoft.

The size alone is a problem too. Wccftech notes that few firms could pay for a $100 billion-plus purchase on their own, so a group of buyers would be the only realistic route.3 Even the low end of the range would beat the biggest leveraged buyout on record, the $55 billion take-private of Electronic Arts earlier this year.8 That deal, led by Saudi Arabia's Public Investment Fund, Silver Lake and Affinity Partners, closed in August 2026.2 At the top of the range, an Xbox deal would cost almost three times as much.2

The EA precedent

The EA deal matters here. It showed that big gaming companies can be bought by groups of private equity firms and sovereign wealth funds, and that lenders will finance those deals. Before EA, a buyout of a major Western publisher was mostly theoretical. Now there is a model to follow, and buyout firms looking at Xbox were probably measuring it against that model. Whether EA's new owners can make the deal pay off is still unknown. TheGamer notes that it is too early to judge the effect on the company.5

The two deals are not alike in one key way. EA was a single publisher. Xbox is a set of separate businesses, including hardware, a subscription service, a cloud gaming platform, and publishers such as Activision Blizzard and Bethesda's parent ZeniMax.2 For private equity, that complexity is both the appeal and the risk. A buyer could sell off pieces separately, which offers several ways to cash out. But it would also have to keep funding a next-generation console. Fortune reports Xbox has projected that console could cost between $1,200 and $1,800 at a planned holiday 2028 launch.3

The Activision math doesn't add up neatly

Many readers compared the valuation with Microsoft's own deals. Microsoft announced the Activision Blizzard purchase in 2022 at $68.7 billion and closed it in October 2023. Before that, it bought Mojang for $2.5 billion in 2014.1 Outlets don't agree on the Activision price. Most use $68.7 billion, while Wccftech says roughly $75 billion.13

Windows Central subtracted the Activision price from the valuation and concluded that the rest of Xbox is worth $30 billion to $80 billion.13 Power Up Gaming and Digital Citizen both warned against that kind of math. A past purchase price reflects one deal at one moment, not what the asset is worth today.1 The warnings are right. Activision's value in 2022 says little about what a leveraged buyer would pay for it in 2026, given where Xbox's margins are now.

The real story: structure, not a sale

The most important detail may not be the price. According to coverage of The Information's report, Microsoft considered spinning off Xbox, turning it into a wholly owned subsidiary, or forming a joint venture with partners.34 Shopifreaks reports that Microsoft considered the subsidiary option around the same time the buyout firms were looking, and notes that such a change would make a sale easier.8

That is the right way to read Microsoft's statement. "Not for sale" rules out a full sale today. It does not rule out selling a minority stake, a joint venture, or a separate legal entity that could later be sold. Sharma's openness to new partnerships and operating models leaves plenty of room for private money to come in without a sale ever being announced.10 Meanwhile, Sharma is cutting costs: 3,200 job cuts began in July, and three more rounds of layoffs have been reported.32 Microsoft also has heavy spending demands elsewhere, on data centers and AI.

My read is that the $150 billion figure is not a deal that almost happened. It is a price point for a deal that could happen later. If Sharma's turnaround raises margins, Xbox becomes more valuable whether Microsoft keeps it or not. If the turnaround fails, the private equity interest now on record gives Microsoft a way out, starting at $100 billion. For now, Microsoft's public answer is unchanged: Xbox is not for sale.110