Xbox's record results for Game Pass and Call of Duty offset by continued decline in hardware revenue

Microsoft has released its financial report for the second quarter ended December 31, 2025. The results of its gaming division were mixed, with content and service growth offset by declines in hardware revenue.

Financial highlights

According to its earnings release, Microsoft’s gaming revenue fell 7% year-over-year and reached $6.58 billion in Q2 FY25. The company doesn’t disclose Activision Blizzard’s contribution anymore, so it is unclear what the subsidiary’s impact was.
The main factor behind the decline was console sales. The gaming division’s hardware revenue fell 29% year-over-year in the second quarter.
Xbox’s content and services revenue grew 2% year-over-year, driven by growth in Xbox Game Pass and stronger-than-expected performance in Activision Blizzard content.
Microsoft CFO Amy Hood told investors that the company expects gaming revenue growth in the third quarter to be “in the low single digits,” with a decline in hardware revenue and low to mid-single digit growth in first-party content and Game Pass.

Game results and service growth

According to CEO Satya Nadella, Game Pass set a new quarterly record for revenue, with a 30% growth in the number of subscribers on PC.
Call of Duty: Black Ops 6 was the best-selling game on Xbox and PlayStation during the three-month period ended December 31, 2024. It “saw more players in its launch quarter than any other paid release in franchise history.”
Indiana Jones and the Great Circle surpassed 4 million players, including those who tried out the game through Game Pass.
Nadella also noted that Xbox Cloud Gaming set a new record last quarter, with 140 million hours streamed.