Microsoft Gaming’s new CEO Asha Sharma and Xbox Studios chief Matt Booty have issued a stark self-assessment of the struggling Xbox brand. The company is facing an unenviable 3% profit margin, down from previous years and far below industry standards.

The downturn is attributed to overextended investments in acquisitions, including the $69 billion purchase of Activision, and platform development. Despite this heavy spending, gaming revenues have actually declined by nearly half a billion dollars since five years ago.

Furthermore, the company has admitted that it has not sufficiently funded its key franchises, leading to a slew of layoffs and cancelled projects from Redmond’s studios.

The hardware side is no better; Microsoft faces rising costs for storage and RAM, with executives believing they are hit harder than competitors due to past decisions. The overall message: a significant overhaul is needed for Xbox to regain its former glory.