Xbox revenue is declining — and other insights from Microsoft's report
Microsoft Corporation reported its earnings for the third quarter of fiscal 2026, which spanned from January to March. The company announced that its gaming division continues to experience a decline in revenue.
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Highlights from the report:
- Over the three months, Microsoft earned $82.9 billion, which is an 18% increase from the previous year;
- Meanwhile, Xbox's quarterly revenue fell by 7%, dropping to $5.3 billion. Microsoft explained this decline as a result of decreased sales of both consoles and games;
- more specifically, revenue from Xbox console and hardware sales plummeted by 33%, while revenue from Xbox gaming content and services decreased by 5%;
- Xbox remains the third most profitable division within Microsoft. Only the teams developing server and cloud solutions ($32.6 billion) and Microsoft's commercial products 365 ($25.6 billion) earned more for the quarter;
- although Xbox's revenues are declining, it still performs well in other areas. During an investor call, Microsoft CEO Satya Nadella boasted that the number of monthly active players on the corporation's platforms reached a record high—though he did not disclose the exact number. Additionally, Xbox Cloud Gaming users spent a record number of hours gaming in the past quarter;
After the quarterly report was released, the new head of Xbox, Asha Sharma, commented on the division's results on X. She acknowledged that the revenue and player numbers did not meet the team’s expectations, but she hopes to rectify this in the future.
“We understand that we have a lot of work to do to earn the trust of every player—both today and in the future,” Sharma stated.