Xbox Sees $1.7 Billion Revenue Decline Over the Past Year

Microsoft recently announced a significant increase in profits for the last quarter, but its gaming division, Xbox, didn’t share in that success. Xbox experienced a notable decline in revenue, trailing behind the company’s other sectors with a double-digit drop year-over-year. This downturn comes amid a strategic overhaul and ongoing layoffs.

In its fourth-quarter earnings report, Microsoft revealed a 10-percent decrease in content and services revenue compared to the previous year, alongside a 13-percent decline in Xbox hardware sales. In contrast, Xbox content and services had reported a 13-percent growth during the same quarter in 2025.

The situation looks even bleaker when considering the entire fiscal year. Microsoft stated, “Xbox revenue decreased by $1.7 billion or 7 percent, driven by declines in Xbox content and services and Xbox hardware.” The report noted a 5-percent drop in Xbox content and services revenue, which had previously benefited from strong first-party titles, although this was partially offset by growth in Xbox Game Pass. Xbox hardware revenue plummeted by 29 percent due to a reduced volume of consoles sold.

These financial struggles have led to significant cuts within Xbox, including around 1,600 layoffs expected over the next year. New Xbox CEO Asha Sharma has indicated a shift in investment strategy, moving away from smaller studios that focus on niche games and concentrating on major franchises like The Elder Scrolls and Fallout. This disappointing performance follows a particularly rough year for Call of Duty: Black Ops 6. Microsoft’s acquisition of Activision Blizzard for over $70 billion in 2023, a massive publishing entity that overshadows Xbox’s first-party studios, adds to the pressure.

Additionally, Xbox is facing challenges from repeated price increases on its consoles, driven by a competitive AI hyperscaler market that Microsoft is heavily investing in. The standard Xbox Series X now retails for $750, marking a 33-percent increase from its launch price in 2020. The company is also working on its next-gen Project Helix hardware. With reports indicating that Microsoft is still losing money on each new Xbox sold, even at these elevated prices, it remains uncertain how the company plans to regain console market share in the current environment, or if that is even a priority.