For the second quarter, Microsoft announces a 9% decline in games revenue

The technology titan, Microsoft, has observed a downturn in its Xbox segment's financial results for this year's second quarter. This trend was linked to the underwhelming first-party performance and a substantial drop in console sales.

Financial Summary

Covering the quarter that concluded on December 31, 2025

• Games revenue: Reached $623 million, indicating a 9% decrease from the prior year
• Xbox content and services revenue: Exact amounts were not shared, but there was a 5% reduction compared with the previous year
• Xbox hardware revenue: Also undisclosed, with a sharp 32% decrease year-on-year

During the last three months of 2025, the Xbox division accumulated $623 million, showing a 5% decline in the revenue from its content and services, which includes game sales and subscriptions. The dip in year-over-year revenue was attributed to a stronger "first-party content performance" in 2024, as detailed in Microsoft's 10-Q filing with the SEC. Chief Financial Officer Amy Hood mentioned to investors that the performance was below the company's expectations, driven by their own content.

The underperformance of specific first-party titles is not clear, yet a shift in the release schedule for the Call of Duty franchise by Microsoft's Activision subsidiary is noteworthy. Data from GamesIndustry.biz indicates the shooter franchise has witnessed a significant decline in its player base over the past year.

The Xbox hardware business also faced challenges, with a 32% year-on-year fall in revenue due to reduced console sales. Microsoft CEO Satya Nadella attempted to remain optimistic about the future of their gaming sector. "In gaming, our commitment remains strong in bringing exceptional games across Xbox, PC, cloud, and beyond," Nadella asserted. He highlighted record numbers in PC users and paid streaming hours on Xbox.

Looking ahead to the third quarter ending March 31, 2026, Microsoft anticipates continued year-on-year decreases in both Xbox content and services revenue, as well as its hardware division. The release of ROG Xbox Ally occurred during Q2, and Asus reported the handheld device surpassed expectations, benefiting from their collaboration with Microsoft on this venture.

The company has also revealed ongoing development of its "next-generation hardware". Additionally, Craig Duncan, who leads Xbox Game Studios, remarked a desire for increased consistency in releasing titles on the PlayStation 5.