Microsoft announces a 9% decline in its gaming revenue for the second quarter
Microsoft has announced a downturn in the performance of its gaming division for the second quarter, attributed to challenges with first-party content and a significant decrease in console sales.
Financial Overview
Review period ending December 31, 2025
- Gaming revenue: $623 million, a 9% drop from the previous year
- Xbox content and services revenue: Undisclosed figures, with a 5% decline year-on-year
- Xbox hardware revenue: Undisclosed figures, with a 32% decrease year-on-year
In the closing quarter of 2025, Microsoft's Xbox division brought in $623 million. The division's content and services segment, which encompasses game sales and subscriptions, saw a 5% reduction.
According to Microsoft's SEC 10-Q filing, the decline was partly due to stronger first-party content performance in 2024. CFO Amy Hood described the division's results as falling short of expectations.
While it's unclear which releases underperformed, recent shifts in the Call of Duty strategy by Microsoft's Activision were noteworthy, with a notable reduction in its player numbers over the past year.
The hardware segment also under-delivered, with a 32% year-on-year revenue drop due to lower console sales.
Despite the setbacks, CEO Satya Nadella remained hopeful about the gaming sector's future, highlighting intentions to provide premier games across all platforms including Xbox, PC, and cloud. "We saw record PC players, and paid streaming hours on Xbox," Nadella remarked.
For Q3, concluding March 31, 2026, another reduction in Xbox content and services revenue, along with its hardware sales, is anticipated.
In Q2, Microsoft launched the ROG Xbox Ally, a project in collaboration with Asus, which surpassed expectations.
The company also announced ongoing development of new-generation hardware.
Craig Duncan, leader of Xbox Game Studios, expressed intent to enhance the release consistency of titles on PlayStation 5.