Xbox hardware revenue down 32% in latest earnings report, weak first-party games and price hikes to blame
Microsoft has shared its latest financial results, and the numbers aren’t great for Xbox hardware. Revenue from Xbox consoles and accessories dropped by 32% compared to the same period last year. Xbox’s overall gaming revenue also fell by 9%. These results cover Microsoft’s second quarter, which ended on December 31, 2025 (the company’s fiscal year starts July 1).
During this period, Microsoft’s gaming division made $5.99 billion in revenue, which is about $623 million less than last year. The biggest reason for the drop was lower Xbox console sales. Xbox content and services, which include Game Pass and digital game sales, also declined, but only by around 5%.
Exact console sale numbers are not available
Source: Microsoft
Source: Microsoft
Previous
Next
“Xbox hardware revenue declined 32%” can be found here, on slide 12.
Microsoft still does not share exact Xbox console sales numbers, something it has avoided for years. However, the company did explain that weaker first-party games played a role in the lower performance. Or rather, last year had a stronger set of titles. Games released during the most recent quarter included Ninja Gaiden 4, Keeper, The Outer Worlds 2, and Call of Duty: Black Ops 7. Out of that shortlist, Call of Duty: Black Ops 7 appears to have underperformed the most.
Xbox hardware sales may have also been hurt by recent price increases. Microsoft raised prices on Xbox consoles and accessories more than once in a short time, making them harder to justify compared to other systems. On top of that, Microsoft’s recent “This Is An Xbox” marketing campaign focuses on playing Xbox games across many devices, like PCs and phones. While this helps promote Game Pass, it may also reduce the need for people to buy an actual Xbox console.
While Xbox is struggling, Microsoft as a whole is doing very well. The company reported total revenue of $81.3 billion for the quarter, which is a 17% increase year over year. This growth mainly comes from Microsoft’s cloud and business software divisions. Azure and other cloud services saw strong growth, and Microsoft 365 products like Word and Excel also performed well. With the company continuing to push AI as a main target, it’s no surprise to see these divisions growing.
link
