Xbox Sees Yearly Revenue Drop as Microsoft CFO Points to Decline in First-Party Game Sales

Xbox’s revenue has taken a hit once again, according to Microsoft’s latest financial report.

In the earnings report for the second quarter of the fiscal year, covering October to December 2026, the gaming division is showing a decline compared to the same period last year.

Sales from Xbox hardware, including the Xbox Series X|S consoles and accessories, plummeted by 32% year-over-year. This drop comes despite, and likely due to, two significant price hikes within just five months, making competing consoles seem more appealing. While specific sales figures weren’t disclosed, Microsoft has been less than forthcoming about Xbox console sales for quite some time.

The company’s ‘This Is An Xbox’ marketing campaign may not have helped, as it subtly suggested that players might not actually need an Xbox Series X|S console, implying, “You’re probably reading this right now from an Xbox.”

Revenue from Xbox content and services decreased by 5%, contributing to an overall revenue decline of 9% for Xbox. Microsoft CFO Amy Hood noted that the gaming results fell “below expectations, driven by first-party content,” with the downturn likely linked to a “strong first-party content performance” in the previous year. This could be tied to the relatively weaker sales of Call of Duty: Black Ops 7 compared to 2024’s Black Ops 6.

On a broader scale, Microsoft experienced a 17% increase in overall revenue year-on-year. With an exciting lineup on the horizon, including the Fable reboot, Forza Horizon 6, and Halo: Campaign Evolved all set to launch in 2026, there’s hope that Xbox can rebound next year.

“We’re going to try and be more consistent with what we do,” said the head of Xbox Game Studios, reflecting on the Developer Direct, the multiplatform strategy, and lessons learned from 2025.