Xbox Hardware Sales Continue to Decline

The drop in Xbox hardware revenue has become so routine that you could almost set your watch to it. Microsoft shared its second-quarter earnings recently, and once again, console sales are on the decline. The gaming division as a whole didn’t fare much better during the holiday season. The company attributes the year-over-year downturn to a lack of major releases towards the end of 2025.

“Xbox content and services revenue fell by 5 percent (6 percent in constant currency) compared to a previous year that saw strong first-party titles,” the latest earnings report states. “Xbox hardware revenue plummeted by 32 percent.”

However, last year’s figures weren’t particularly impressive either. The gaming division experienced an overall decline of 7 percent in the second quarter. Xbox hardware sales dropped by 29 percent this time in 2025, while content and services saw only a modest increase of 2 percent. The holiday season of 2024 featured titles like Indiana Jones and the Great Circle and Microsoft Flight Simulator 2024, but it was otherwise fairly quiet.

In contrast, the holiday season of 2025 brought us Ninja Gaiden 4 and The Outer Worlds 2, alongside the arrival of Flight Simulator on PS5. The underwhelming performance of Call of Duty: Black Ops 7, combined with a significant price increase for Game Pass, may have contributed to a rise in subscriber churn. However, we can’t be certain, as Microsoft has yet to disclose new subscriber figures.

What’s clear is that the Xbox Series X/S is becoming a smaller piece of the puzzle for Microsoft Gaming and the company overall. This trend has been evident almost every year since the consoles launched. While the company has promised new hardware, the focus of the evolving Xbox platform seems to be shifting away from traditional consoles.

With the ongoing AI arms race driving up gaming hardware costs in the short term, perhaps this shift is for the best.