Microsoft reported a decline in its gaming business revenue for the third calendar quarter of 2026. Xbox revenues decreased by 2% year-over-year, down to $5.38 billion. Both console sales and content with services showed negative trends.
This information is stated in Microsoft's financial report (https://www.microsoft.com/en-us/investor/earnings/fy-2027-q1/press-release-webcast) for the first quarter of the 2027 fiscal year. It’s worth noting that Microsoft's fiscal year starts on July 1, so its first quarter corresponds to the third calendar quarter — the period from July to September 2026.
Key Xbox metrics:
- Total revenue — $5.38 billion, which is $129 million (2%) less than the previous year;
- Revenue from hardware sales — declined by 14% year-over-year (Microsoft attributed the decrease to a reduction in the number of consoles sold);
- Revenue from content and services — also decreased by 2% (due to lower revenues from Game Pass and third-party games).
For comparison, in the third calendar quarter of 2025, Xbox hardware revenue dropped by 29%, but revenue from content and services increased by 1%.
Interestingly, a year ago, Game Pass was positioned as a growth factor. Unfortunately, Microsoft did not disclose specific subscription figures, neither revenue nor changes in subscriber numbers.
It’s noteworthy that Microsoft's gaming business is shrinking against the backdrop of overall corporate growth. The company's total quarterly revenue increased by 19% year-over-year, reaching $92.3 billion. Net profit grew by 32%, to $36.6 billion.
Despite the decline in financial indicators, Microsoft expects to return to growth in its gaming business. Specifically, the company forecasts an increase in Xbox content and services revenue in the next quarter, although hardware sales are expected to continue to decline.